Finance
Target-Date Funds Held a Nasty Surprise for Retirees
Portfolios aimed at reducing risk as owners approach retirement still had a lot in stocks.
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As the bull market soared, investors in America’s 401(k) retirement plans increasingly entrusted their savings to a one-stop kind of investment. All they had to do was pick a fund that corresponded with their retirement date. Presto, they had an age-appropriate mix of stocks and bonds.
These so-called target-date funds hold $1.4 trillion, equal to a quarter of the money in 401(k)s. The offerings generally place 20-year-olds mostly in stocks and then glide gradually into bonds as clients near their departure from the workforce. In theory, that strategy should protect older investors from the worst of bear markets—like the one sparked by the coronavirus pandemic.