BYK Financial Webinar on the Advantages and Limits of Target Date Funds

Target-Date Funds: How Do They Work and What are their Limits?

    Over 50% of all new 401k contributions go into Target-Date Funds (TDFs).  As its name implies, when a TDF receives investors’ funds via payroll deductions, it allocates those funds among cash-equivalent, bond, and stock (and occasionally other) funds. The breakdown of the allocation among these asset classes is linked to the year of the employee’s 65th birthday. The further away from retirement (e.g., a 2060 TDF), the greater the allocation to equities. Gradually over time, this allocation to equities lessens as the employee approaches (and during) retirement. However, employees should know more about both the strengths and limits of TDF investing. This will be the focus of this workshop.