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The research also shows that despite increases in the utilization and appeal of TDFs, participants continue to have striking misconceptions about them. While 67% of TDF users understand the asset-allocation strategy (or glide path) associated with this type of investment, 34% said they believe their TDF account balance is guaranteed never to go down. Thirty-seven percent of participants surveyed said they believe a TDF guarantees that their income needs will be met in retirement. “While participants continue to have misconceptions about certain TDF features, our research suggests that it’s unclear whether more education is the solution. The reality is that accidental investors often don’t want to understand how investments work—they just want to know they do work,” Healy said. Many participants also show a strong desire for lifetime income solutions in their TDFs. Two-thirds (67%) of participants said the single most important feature they want from their DC plan is a steady income stream in retirement. Nearly 80% of current TDF users found a TDF with secure income stream features appealing—as did 53% of non-TDF users and 47% of non-plan participants. AllianceBernstein’s plan participant survey was conducted online in February 2012 with 1,002 respondents who were full-time employees at least 18 years of age and working for companies that offered DC plans. A report of survey findings can be found at www.abdc.com.
The research also shows that despite increases in the utilization and appeal of TDFs, participants continue to have striking misconceptions about them. While 67% of TDF users understand the asset-allocation strategy (or glide path) associated with this type of investment, 34% said they believe their TDF account balance is guaranteed never to go down. Thirty-seven percent of participants surveyed said they believe a TDF guarantees that their income needs will be met in retirement.
“While participants continue to have misconceptions about certain TDF features, our research suggests that it’s unclear whether more education is the solution. The reality is that accidental investors often don’t want to understand how investments work—they just want to know they do work,” Healy said.
Many participants also show a strong desire for lifetime income solutions in their TDFs. Two-thirds (67%) of participants said the single most important feature they want from their DC plan is a steady income stream in retirement. Nearly 80% of current TDF users found a TDF with secure income stream features appealing—as did 53% of non-TDF users and 47% of non-plan participants.
Rebecca Mooreeditors@plansponsor.com