The financial industry figured out how to improve saving before retirement, and 401(k) investors are taking advantage.
The idea is simple: create an investment choice that allows you to “set it and forget it” until you retire. These options available in a 401(k) plan are called target date funds (TDF). If you elect a TDF when you’re young, the fund automatically recalibrates as you age, becoming more conservative as you near retirement. In that way, the fund captures growth and is less likely to experience severe setbacks from market downturns as you approach retirement.
An article in the San Francisco Chronicle says Vanguard reported that just over half of participants in the 401(k) plans it administers are invested in a single target date fund. These funds account for one-third of the assets in all 401(k) and other defined contribution plans run by Vanguard.More