The Myth About Target Date Fund Participant Inertia    

Are target date fund participants truly inactive, even during market volatility?

The success of a target date fund (TDF) depends not only on asset allocation, market environment, and manager skill, but also on participant behavior. PGIM’s recent research sheds light on TDF investor behavior when markets decline. This paper challenges long-held assumptions about participant inertia and encourages plan fiduciaries to reconsider whether high-equity TDFs are prudent for investors nearing retirement.

The target date is the approximate date when investors plan to retire and may begin withdrawing their money. The asset allocation of the target date funds will become more conservative as the target date approaches and for ten years after the target date by lessening the equity exposure and increasing the exposure in fixed income investments. The principal value of an investment in a target date fund is not guaranteed at any time, including the target date. There is no guarantee that the fund will provide adequate retirement income. A target‐date fund should not be selected solely based on age or retirement date.

This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation. Clients seeking information regarding their particular investment needs should contact their financial professional.

© 2021 Prudential Financial, Inc. and its related entities. The Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

1053280-00001-00   PI6885   Expiration: 4/30/2023

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