Target-date funds — the most popular 401(k) plan investment — don't work for everyone
Published On Jan 6, 2025, 1:36 PM
Target-date funds (TDFs) are increasingly popular investment options within 401(k) plans, with projections that they will capture about two-thirds of all 401(k) contributions by 2027. These funds allow individuals to invest without much management, as they automatically adjust their asset allocation based on the investor's approximate retirement date. While TDFs offer simplicity and are beneficial for those who may lack investment knowledge, they may not be suitable for all investors, particularly those with more complex financial situations or specific investment preferences.
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The growing adoption and expected dominance of target-date funds in the 401(k) investment space suggest a stable demand for asset managers offering these funds. The automated nature and ease of use appeal to a significant demographic, especially among younger workers.