Rising US interest rates could pose a challenge for target-date funds (TDFs) that concentrate on “core” US fixed-income exposure. Diversifying across a broad range of bond markets and strategies can create a cushion in a rising-rate environment.
Target-date funds played a big part in helping defined contribution (DC) plan participants stay invested through February’s market turmoil. And history does repeat: in the severe 2008–09 financial crisis, these funds kept many participants positioned to take part in a lengthy bull market.
Tax reform. Interest-rate hikes. Regulatory questions. Inflation. There’s always a reason to put off making changes to your company’s defined contribution (DC) plan. But some improvements will be good for your plan and participants no matter what happens.
The US Department of Labor (DOL) has cut financial advisors some slack in getting ready to comply with its new fiduciary rule. But defined contribution (DC) plan sponsors don’t have the same luxury.
Many plan sponsors are shifting away from recordkeepers’ target-date funds to nonproprietary versions. But others are still using yesterday’s model. We think it’s time to take a look around.