New studies reveal that 401(k) plans are seeing an increase in demand for target-date assets as a strategy for investing. Current estimates are predicting that, by 2016, target-date strategies will account for nearly 22 percent of total Plan assets. This trend is in line with the increased demand for target-date investments which dates back to their initial growth in 2002.
So why are people choosing to invest in target-date investments? The answer: it provides Plan participants an option to have their investment options monitored by a third-party and a balance of the acceptable level of risk for an individual based on when they expect to retire. In general, a person who expects to retire soon is going to invest their assets in funds that have a lower risk and those who do not expect to retire soon will accept greater risk, because there is expected to be a greater return in the end. There are many investment options available and it is up to Plan participants to weigh their options and choose the one that is most beneficial to their lifestyle.
Have questions about target-date assets? Contact our Cleveland and Akron Accounting & Auditing professionals at 440-449-6800.