Retirement-at-Risk: Design Considerations for Target Date Funds and Lifecycle Products

Target date funds help to simplify the retirement saving challenge for investors. Yet many of these products leave individuals with equity exposure of around 50% as they exit the workforce, so does this level of market risk match what they would expect? Such elevated levels of risk at the end of an investor‘s working life can put retirement plans at risk. In recognition that a simple bond/equity glidepath may not be enough, in this paper we highlight three ways to help manage drawdown risks and reduce volatility as the investor approaches their target date.