{"title":"Target Date Funds: Evidence Points to Growing Popularity and Appropriate Use by 401(k) Plan Participants","authors":"S. Holden, Jack L. VanDerhei, S. Bass","doi":"10.2139/ssrn.3923143","DOIUrl":"https://doi.org/10.2139/ssrn.3923143","url":null,"abstract":"This report uses the EBRI/ICI 401(k) database, which has data on 14.6 million 401(k) plan participants at year-end 2018, to analyze 401(k) plan participants’ use of target date funds (TDFs). A growing number of investors save for retirement through TDFs, and this report provides insight into how the use of TDFs varies by 401(k) plan participant age and job tenure. TDFs hold a diversified portfolio of both stocks and bonds and also rebalance to become less focused on growth and more focused on income as the fund approaches and passes the target date, which is usually included in the fund’s name. Key findings from the report, include: The prevalence of TDFs has risen over time as both the percentage of 401(k) plans offering (79 percent in 2018) and the percentage of 401(k) participants investing in TDFs (56 percent in 2018) have grown considerably. TDFs are designed to be a complete asset allocation solution and the vast majority (94 percent) of 401(k) participants investing in TDFs held one TDF at year-end 2018. The majority of 401(k) plan TDF investors have most of their assets in a single TDF that is appropriate for their age. Younger 401(k) savers are more likely to hold TDFs, and hold a higher concentration of assets in those funds. Younger 401(k) savers are more likely to have been offered TDFs when they enrolled in the plan or may have been automatically enrolled into these funds as a default investment, compared with older participants. Overall, 401(k) plan TDF investors had slightly higher allocations to equities than 401(k) savers not using TDFs, although the difference was more pronounced among younger investors. Older 401(k) plan participants had similar allocations to equities whether they were TDF investors or not.","PeriodicalId":334290,"journal":{"name":"FinPlanRN: IRA Accounts (Topic)","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130843220","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Beshears, James J. Choi, David Laibson, Brigitte C. Madrian, Bill Skimmyhorn
{"title":"Borrowing to Save? The Impact of Automatic Enrollment on Debt","authors":"J. Beshears, James J. Choi, David Laibson, Brigitte C. Madrian, Bill Skimmyhorn","doi":"10.3386/W25876","DOIUrl":"https://doi.org/10.3386/W25876","url":null,"abstract":"Does automatic enrollment into a retirement plan increase borrowing outside the plan? We study a natural experiment created when the U.S. Army began automatically enrolling newly hired civilian employees into the Thrift Savings Plan. Four years after hire, automatic enrollment causes no significant change in credit scores (point estimate 0.001 standard deviations) or debt balances excluding auto loans and first mortgages (point estimate -0.6% of annual salary). We also find no significant increase in auto loan and first mortgage balances in our main regression specification, although the estimated increases in these categories are economically and statistically significant in alternative specifications.","PeriodicalId":334290,"journal":{"name":"FinPlanRN: IRA Accounts (Topic)","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125006031","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}