Target Date Funds and Goal-Based Benchmarks

This recent article from an industry leader sheds light on the methodology that The Retirement Analyst has espoused for many years. Specifically, participants are looking for Target Date Funds to meet a single goal-based objective: To help investors achieve financial security in retirement.

It states, “The need for benchmarks that help investors assess their progress toward a financially secure retirement will become more pronounced” and “potentially help investors obtain a clearer picture of the long-term returns a fund provider expected to deliver.” “Each providers approach reflects its expectations about the returns available from a given strategy and its estimate of the long-term return required to help investors accumulate sufficient assets for retirement.” “Existing benchmarks typically emphasize short-term volatility rather than long-term return – the more important consideration for a target date fund investor.”
Target Date Funds and Goal-Based Benchmarks (continued)

The Retirement Analyst helps investors assess their progress toward a financially secure retirement by creating benchmarks that lead to their goal. We calculate long-term expected returns and risk for all self-managed portfolios and use provided expected returns or calculate them for target date funds including their glide paths over time. By comparing actual participant internal rates of return to their expected returns, participants know whether or not their investments are meeting their long-term return threshold and helps them focus on long-term results rather than short-term volatility. Using this information, participants know the implied risks of these expectations and can adjust their contributions if necessary.

Vanguard Target Date Article
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