TDFs in 401(k) plans gaining in popularity

Target-date funds have become popular additions to 401(k) retirement plans because they offer convenience, portfolio choices based on a participant’s retirement age and a commitment device for future age-based equity balancing. The funds have made it easier for employees, who do not have the financial literacy to make their own portfolio decisions, to have access to a professionally managed retirement account, according to a new report by the Pension Research Council.

The report evaluates how the introduction of target-date funds influences patterns of both adoption and portfolio construction within 401(k) plans.