Target-date funds are becoming more mainstream, and retirement plan participants are putting more money into them than into other options as well as feeling more confident that they will meet their retirement goals.
That's according to a survey from Voya Investment Management, which found that participants are more accepting of TDFs as they better understand their features. In addition, millennials are more interested in them than GenXers or boomers—"likely," according to the report, "because they have been introduced to them from the very beginning of their careers."
Plan participants who use TDFs are more likely to save more—28 percent of TDF participants said they are contributing more than 11 percent of their income into TDFs, compared to just 14 percent of non-TDF users who save as much.
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Overall, 34 percent of both TDF and non-TDF investors are contributing 7–10 percent of their income.
Higher confidence levels are probably responsible for those higher contribution levels—and TDF users are contributing a median of 2 percent more of their income than non-TDF users. According to the report, TDF users are more comfortable in making investment decisions; they also exhibit stronger indicators of future success, such as those higher contribution levels.
More than 75 percent of users feel that TDFs alleviate the stress of retirement planning, 75 percent report increased confidence that they are making good investment decisions and 72 percent say TDFs help them feel more assured they will have a successful retirement.
Among non-TDF users, just 37 percent say a TDF would alleviate the stress of retirement planning, only 34 percent report increased confidence that they are making good investment decisions and 35 percent say a TDF would help them feel more assured they will have a successful retirement. That's less than half the rate of TDF users.
Interestingly, nearly two thirds of TDF users prefer funds with a "to retirement" asset allocation glide path over a "through retirement" glide path.
Among those who don't use TDFs, participants are evenly divided in their preferences between "to retirement" glide paths and "through retirement" glide paths.
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