Methodology and Sources

ForUsAll Retirement Investment Module

 

Picking the right target date fund

A target date fund is a mutual fund that is managed towards a specific target retirement date (i.e., the approximate year in which an investor expects to retire).  Target date funds automatically adjust their asset mix (stocks, bonds, cash equivalents) as the fund approaches its retirement date, generally decreasing risk over time.  These funds are not personalized to your unique situation and are generally prudent for an average investor. 

To help you select the right target date fund, we use your current age and the year you expect to retire.  We then select the target date fund closest to your retirement horizon.  In developing our target date fund recommendation, we only consider the target date fund options available in your retirement investment account and not your other mutual fund options.  Additionally, the objective of our advice is to help you invest your retirement investment account appropriately, not your overall investment portfolio, which may include investments outside of your retirement investment account.  Consequently, our target date fund recommendation does not take into consideration any assets you may have outside of your retirement investment account.   

The investment performance of target date funds is not guaranteed, and while these funds are managed at a prudent risk level, you may experience investment losses, particularly when market performance is poor.  ForUsAll does not manage the target date funds in your plan nor influence their management.  

General asset class guidelines

Any asset allocations shown are only general guidelines for your consideration. These asset allocations were created based on publicly available data from Morningstar.  Specifically, we started with the most recently published asset allocations for Morningstar’s Lifetime Allocation Index series – which include US Stocks, Non-US stocks, US- bonds, non-US bonds, TIPS, commodities and cash.  Since many plans do not offer allocations to TIPs or commodities, these asset allocations were reclassified as follows: TIPs were reclassified into US-bonds while commodities were reclassified into US-Stocks and Non-US stocks according to their respective asset weights in the stock category.

To determine your asset allocation guidelines we used your age and time to retirement.  We then selected the “Moderate” Lifetime Allocation Index that most closely matched your retirement horizon. Morningstar believes that the “Moderate” Lifetime Allocation Index is appropriate for an investor that is comfortable taking moderate investment risk.  We do not make any representations as to the appropriateness of Morningstar’s methodology or their process for constructing their Lifetime Allocation Index series.   

For more information on Morningstar’s index methodology or their most recent asset allocation see www.morningstar.com.

If you choose to manage your own investment portfolio, you take full risk and responsibility for investment outcomes.  The general asset classes guidelines do not guarantee investment performance and could result in investment losses, particularly if market performance is poor. 

Top reasons for choosing target date funds

The top reasons for choosing target date funds were based on a consumer study conducted by Siegel & Gale and submitted to the Securities and Exchange Commission on February 15, 2012 entitled “Investor Testing of Target Date Retirement Fund (TDF) Comprehension and Communications.”  The study findings do not necessarily reflect the views of the Securities and Exchange Commission, its Commissioners or its members.

Nearly two out of three people aren't confident making investment decisions

According to MassMutual's 2011 Survey of Defined Contribution 401(k) Plan Participants, only 37% of people were confident making investment decisions - leaving 63% surveyed less than confident.

Effective date: June 15, 2015