PRM Consulting

Target-date Funds Continue to be 401(k) Favorites

Washington D.C.

An updated joint study conducted by the Investment Company Institute (ICI) and the Employee Benefit Research Institute (EBRI) states that younger participants continue to invest in target-date funds (TDFs). According to the original study, in 2019, participants in their twenties allocated 54.1% of their assets to TDFs compared to an allocation of just 28.8% by plan participant in their 60s.  It is also worthy of note that in this same data pool, 31.3% of 401(k) assets were invested in TDFs, up from 26.6% in 2018. 

Target date funds are designed to offer a diversified portfolio that focuses on growth for younger participants and automatically rebalances to focus more on fixed-income investments for workers as they approach and enter retirement.  

The study also reveals that average 401(k) account balances increase with participant age and tenure. In addition, a minority of 401k participants had loans outstanding.