Asset managers, insurance companies and employers are moving toward making guaranteed lifetime income options more broadly available through 401(k) plans.
Asset managers, insurance companies and employers are moving toward making guaranteed lifetime income options more broadly available through 401(k) plans.
Asset managers, insurance companies and employers are moving toward making guaranteed lifetime income options more broadly available through 401(k) plans.
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Generally, 2020 target-date funds were conservative enough to cushion the market’s blow early in the year. Illustration by Glenn Harvey Text size
For anyone who had been contemplating retiring in 2020, the first quarter couldn’t have been easy. Stocks fell 34% in 23 days as the pandemic took hold and the economy quickly weakened. These stomach-churning moments are when investors make some of their worst mistakes the kinds of mistakes that automatic investment products, like target-date funds, try to circumvent. In 2020, they largely did.
As of Dec. 31, 2020, the average return of a vintage 2020 target-date fund was 10.8%, one percentage point lower than the 11.7% return for a balanced fund with a 50% to 70% equity allocation, according to data from Morningstar Direct. In the first quarter, 2020 target-date funds overall fell 10%, on average.