What People Know About Target-Date Funds: Survey and Focus Group Evidence

Posted: 28 Aug 2013 Last revised: 29 Aug 2013

See all articles by Julie R. Agnew

Julie R. Agnew

College of William and Mary - Mason School of Business

Lisa R. Szykman

College of William and Mary - Mason School of Business

Stephen P. Utkus

University of Pennsylvania; Center for Financial Markets and Policy, Georgetown University

Jean A. Young

The Vanguard Group, Inc. - Center for Retirement Research

Date Written: May 1, 2011

Abstract

Making portfolio allocation decisions can be difficult for American households who lack interest or experience in financial matters. Service providers and 401(k) plan sponsors have introduced new plan design approaches and investment products, such as target-date funds, that can simplify savings and investment choices for defined contribution (DC) plan participants. Some participants invest in the funds on their own; some are defaulted into the fund by plan sponsors through mechanisms such as automatic enrollment, so it is important to understand how knowledge and awareness may differ between active and passive investment decisions. Also, DC plan participants often invest in other assets within their retirement accounts, a phenomenon known as “mixed” target-date investing. This paper seeks to better understand the determinants of participant portfolio allocations to target-date funds. The authors use focus group discussions and survey evidence linked to 401(k) administrative data. They explore rational motivations for portfolio decisions, psychological elements such as trust, and the relationship between financial knowledge and portfolio choice. The current version of this paper presents a preliminary analysis of the survey data and the authors’ focus group findings.

Suggested Citation

Richardson Agnew, Julie and Szykman, Lisa R. and Utkus, Stephen P. and Young, Jean A., What People Know About Target-Date Funds: Survey and Focus Group Evidence (May 1, 2011). Available at SSRN: https://ssrn.com/abstract=2316950

Julie Richardson Agnew (Contact Author)

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States

Lisa R. Szykman

College of William and Mary - Mason School of Business ( email )

Post Office Box 8795
Williamsburg, VA 23187-7895
United States

Stephen P. Utkus

University of Pennsylvania ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Center for Financial Markets and Policy, Georgetown University ( email )

Washington, DC 20057
United States

Jean A. Young

The Vanguard Group, Inc. - Center for Retirement Research ( email )

PO Box 1110
Valley Forge, PA 19482-1110

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