Age-Based – Not Date-Based – Retirement Plan Investing is Popular with Employers and Employees

April 27, 2011

Tools

ST. PAUL, Minn.--(BUSINESS WIRE)-- In the four years since it hit the market, the use (or adoption rate) of Securian Retirement’s TargetAge™ asset allocation tool has become very popular among employees and employers with Securian retirement plans.

“Employees like it because of its simplicity and transparency,” said Rick Ayers, vice president, Securian Retirement Plans. “Employers like it because it’s a fiduciary-friendly alternative to target date and other lifecycle funds.” The weaknesses of a target date approach became apparent during the Great Recession when it failed to perform as expected.

Since its introduction, TargetAge retirement plan investing has attracted employees of all ages. In a paper available on line, Securian Investment Consultant Brian Mong, CFA, AIF^®_, analyzes four years of data about employers’ and employees’ use of TargetAge.

As of December 31, 2010, more than 20 percent of Securian’s defined contribution plans offered TargetAge. Among those plans, 40 percent of participants with a balance had the entire balance in a TargetAge portfolio.
Among the youngest investors (under 30), nearly 55 percent use TargetAge, the highest among all age groups studied. This may signal a trend that younger investors are open to adopting an all-in-one solution like TargetAge.
Older age groups use TargetAge less frequently, but even in the oldest group (60 and over), 32 percent use TargetAge.
TargetAge often is used as the default investment option in Securian retirement plans, but more than 25 percent of participants selected it, while 15 percent defaulted into it.

One of the big differences between TargetAge and target date options is that the glide path is tied to the investor’s age rather than a planned retirement date, now a moving target for many workers. Instead, TargetAge allocations self-adjust to reduce risk as the plan participant ages. To reap the full benefit of this feature, employees who choose it are required to invest their entire accounts in TargetAge.

Because TargetAge options are created out of the investment options employers select for the entire plan, they have the flexibility to alter the makeup of the portfolios or change any of the underlying investment options at any time.

Follow this link to the paper “Age-based investing: ‘All-in-one’ hit with participants, fiduciary protection for plan sponsors.” It is loaded with data about Securian’s experience with TargetAge, information about how the portfolios are structured, and charts and tables that illustrate the various glide paths.

Since 1880, Securian Financial Group and its affiliates have provided financial security for individuals and businesses in the form of insurance, investments and retirement plans. Now one of the nation’s largest financial services providers, it is the holding company parent of a group of companies that include Minnesota Life Insurance Company.

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