Target Date Funds Miss The Target

There has been a significant shift of focus in the industry on the utilization of Target Date Funds. The reality is that most Target Date Funds are missing the target or goal of “planning” for retirement.

MarketWatch recently featured an article titled “Many Boomers’ 401(k)s Are Way Out of Balance,” which discusses the fundamental flaw of Target Date Funds. TDF’s are simply an approximation, which begs the question; should the single largest purchase of a person’s life, the retirement income purchase, be based on such a simplistic approximation? Is it possible to be successful when a person’s entire plan for the future is based on a single data point—his or her age?

While the industry looks at TDFs as a revenue opportunity, Unified Trust looks at portfolio management as a fiduciary function.

The UnifiedPlan® is a “defined goal” account management system that creates an actuarially valid target income for each participant, then manages to that target. The income target is based on a very robust set of data, including any supplemental information the employee provides. As markets and life changes, so do the targets, the account balance, the funded status and the required savings rate. Unified Trust accepts responsibility for adapting each person’s portfolio to these changing circumstances over their investing lifetime. In our role as discretionary plan trustee, we provide the certainty that the process will be both implemented and documented at the individual participant level.

The UnifiedPlan managed account goes far beyond TDF’s, which are an overly simplistic approximation based on a single data point. The UnifiedPlan is a plan for life, not a single date.  Participants deserve no less.