Plan Sponsors, Are you on Target?

  • Written by David
  • June 19, 2013 at 5:44 pm
  • 0
  • Plan Sponsors, Are you on Target?


    A Guide to Understanding and Monitoring your Target Date Fund Program.

    Below, are a few select paragraphs from our full article. To read it in its entirety, go here:

    Target-date funds are becoming more popular with company 401(k) retirement plans. And as they do so, it puts more burden of responsibility on the plan sponsor to know what they are offering their employees who chose to invest in Target-date funds (TDF).

    According to the SEC’s document Recommendation of the Investor Advisory Committee Target Date Mutual Funds April 11, 2013, TDFs had approximately $485 billion at the end of 2012, up 29% over the previous year. Roughly 70 percent of U.S. employers report offering target-date funds as their default investment option for company sponsored defined contribution plans.

    Truth in Labeling; not all Target-Date Funds are created equal!

    ‘My biggest problem with target date funds is that they had absolutely no labeling requirements’ so participants would be confused as to what a 2015, 2020, or 2025 fund really meant’ says Ary Rosenbaum retirement plan attorney in his article “Off the Mark

    Rosenbaum continues ‘Before the last bear market, a participant who thought they would retire around 2010, naturally would have selected a 2010 target date fund. The assumption was that such a fund would be more heavily invested in fixed income securities with very little equity exposure. 2010 target date funds lost an average of nearly 24 percent in 2008, according to the Securities and Exchange Commission (SEC). Losses ranged from 9 percent to a whopping 41 percent. That is a 32 percent difference for participants that are supposed to be in the same boat, retiring in 2010. Imagine the participants invested in the 2010 target date fund that lost 41 percent, almost half of their retirement nest egg was wiped out with retirement just a few years away by a fund that they thought had limited equity exposure.”

    Gratke Wealth, LLC Target Date Fund Analysis Toolbox.

    By access our toolbox, we can perform Target-Date Fund Evaluation and Recommendation – Researching, evaluating, recommending and documenting target-date options and suitability requirements for participants who do not make investment elections or re-enrolled automatically. The toolbox includes these areas of analysis.

    • ●Glidepath
    • ●Diversification; Asset Class Summary, Investment Management Firm
    • ●Structure
    • ●Expenses
    • ●Volatility Comparisons; Up/Down Capture Ratios, Drawdown
    • ●Inflation Hedge


    To read the full article, go here:



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