DEFINED CONTRIBUTION INSIGHTS | November 2016
Defined benefit (DB) plans consistently report better returns — as much as 0.9% higher per year1 — than defined contribution (DC) plans. The Pension Protection Act gave plan sponsors tools to narrow this gap, such as investment re-enrollment and target date funds (TDFs) as default investments. These have helped improve investing behavior for many participants, but what about the 63% of DC plan participants who still make their own investment decisions?2
DEFINED CONTRIBUTION INSIGHTS | September 2016
DEFINED CONTRIBUTION INSIGHTS | August 2016
Equity Glide Path Moves to Emphasis on Income From Emphasis on Growth as Participants Age
We believe that target date series should feature not only a gradual reduction in equities over time, but also a gradual shift in the nature of that equity exposure. This transition, which we call recharacterizing the equity exposure, effectively creates a “glide path within a glide path” that can help lower volatility.
American Funds portfolio manager Brad Vogt explains the importance of the right target date series to help investors pursue their retirement goals. Beyond the glide path, a good evaluation process should include an examination of the underlying funds and the purpose each serves over the long term.
DEFINED CONTRIBUTION INSIGHTS | June 2016
Intermediaries have a new way to differentiate themselves and increase the value they deliver to their clients. The new American Funds Target Date ProView℠ tool provides a fast, powerful online platform to analyze and compare target date fund series to help make an appropriate selection for a DC plan’s participants.
DEFINED CONTRIBUTION INSIGHTS | January 2016
Given the rapid acceptance of target date funds (TDFs) as the primary retirement investment strategy for American workers, the choice of target date provider is now among the most important decisions for an investment committee.
The beauty of a TDF is its simplicity for participants. However, its underlying complexity can challenge committees tasked with assessing a TDF’s glide path design, risk/return profile and fee structure as part of fiduciary due diligence.
One of the considerations is whether the TDF should be actively or passively managed. In either case, appropriate due diligence must be conducted. When selecting a TDF provider, sponsors should remember:
DEFINED CONTRIBUTION INSIGHTS | June 2015
Plan fiduciaries devote significant time and resources to educating participants about the importance of saving for retirement.
Despite this effort and the care that goes into making a well-balanced menu of investment options available to all participants, many participant allocations are at odds with their retirement needs.
DEFINED CONTRIBUTION INSIGHTS | September 2014
In these videos, portfolio managers Jim Lovelace, Wesley Phoa and Brad Vogt discuss the American Funds Target Date Retirement Series.
DEFINED CONTRIBUTION INSIGHTS | August 2014
American Funds Target Date Retirement Series Glide Path
All target date series feature glide paths that reduce equities and simultaneously increase fixed income over time. American Funds Target Date Retirement Series® is distinguished by also featuring shifts in the nature of both the equity and the fixed-income exposure.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks.
The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. Investments in mortgage-related securities involve additional risks, such as prepayment risk, as more fully described in the prospectus. While not directly correlated to changes in interest rates, the values of inflation-linked bonds generally fluctuate in response to changes in real interest rates and may experience greater losses than other debt securities with similar durations.
Each target date fund is composed of a mix of the American Funds and is subject to the risks and returns of the underlying funds. Underlying funds may be added or removed during the year. Although the target date funds are managed for investors on a projected retirement date time frame, the funds' allocation strategy does not guarantee that investors' retirement goals will be met. The target date is the year in which an investor is assumed to retire and begin taking withdrawals. American Funds investment professionals manage the target date fund's portfolio, moving it from a more growth-oriented strategy to a more income-oriented focus as the fund gets closer to its target date. Investment professionals continue to manage each fund for 30 years after it reaches its target date.
Fund shares of U.S. Government Securities Fund are not guaranteed by the U.S. government.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.
Past results are not predictive of results in future periods.