Retirement Investment Solutions
Target date funds have quickly become one of the most popular of all qualified default investment alternatives (QDIAs), particularly as growing numbers of 401(k) plan participants find they lack the time and the expertise to properly diversify and rebalance their portfolio allocations to account for changes in their risk profiles.
As target date funds grow in number and variety, however, we believe sponsors need to meet the challenge of evaluating and selecting the most appropriate funds for their plans and their participants. This challenge applies to both participants who elected to invest in these strategies as well as those who have been “defaulted” into them as QDIAs.
Unlike typical funds that focus on a single asset class, target date funds differ widely according to time horizons, levels of diversification, levels of equity exposure at target date and other factors. Each one of these factors can affect participant outcomes and the plan’s ability to meet participants’ retirement savings goals.
J.P. Morgan Asset Management’s Target Date Compass can help in evaluating and selecting the most appropriate funds for a particular plan by guiding sponsors through a series of thought-provoking questions, enabling assessment of their plans’ desired level of equity exposure for participants at retirement and asset class diversification—based on the plans’ objectives, participant behaviors and risk tolerance.
Based on how plan sponsors respond to the questions, they are guided to one of four Target Date Type quadrants on the Target Date Compass. After determining a Target Date Type, sponsors can compare and further evaluate the funds that match their Type and select the one that is most appropriate for their plan’s goals.
This tool is the result of J.P. Morgan Asset Management’s extensive research into participant behavior patterns and their implications on target date fund design.
To learn more about The Target Date Compass, please contact your J.P. Morgan representative or to schedule a meeting with an investment strategist that can walk you through the process, please email us at Retirement_Insights@JPMorgan.com.
For questions regarding your personal 401(k) plan, contact your 401(k) plan provider.
This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for investment, accounting, legal or tax advice.
J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc.
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