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Taking action on target date design
Target date funds provide a diversified solution to help participants meet their retirement goals. And while the concept is rather simple, the variations of products available in the market can be quite complex. It is essential for fiduciaries to understand these complexities to ensure suitability for their plans. Additionally, we believe a well thought out and documented implementation plan may help enhance retirement outcomes and potentially lower overall plan costs.
Apply the “3Rs” to help ensure the plan menu is best suited to the needs of plan participants
Successful retirement outcomes comes from selecting the most appropriately aligned target date fund based on the needs of an employee population. Performing an assessment of the plan’s objective and alignment with the participant profile can help determine suitability and can also help provide the basis for determining the best glidepath approach for the plan.
Action: Review our 20 questions to consider in target date fund selection as part of your evaluation process.
- Retain or Replace
Whether you decide to retain or replace, fiduciaries must ensure they have documented their process. Additionally, plan fiduciaries are required to monitor the plan’s investment options on an ongoing basis.
Action Leverage our QDIA Investment Policy Statement as a means for ongoing review to ensure consistency and objectivity.
For many employees, decisions such as joining the plan, how much to save, what percentage to defer from their paycheck and how to invest may seem quite overwhelming. Plan sponsors can ease some of these burdens through automatic features that provide them with a path to saving for retirement.
Action: Consider a three-phased approach to automatic features.
Mutual fund investing involves risk; principal loss is possible. There is no guarantee the Fund’s investment objectives will be achieved and the target date is an approximate date when investors may begin withdrawing from the Fund. Target-date mutual funds are actively managed, so the asset allocation is subject to change and may vary from that shown and after the target date has been reached, the Fund may be merged into another with a more stable asset allocation. The Fund is a fund of funds subject to the risks of its underlying funds in proportion to each Fund’s allocation. These risks include those of fixed income underlying funds risks which may be susceptible to general movements in the bond market and are subject to credit and interest rate risks as well as those of equity underlying funds risks, such as foreign investment and issuer risks. Credit risk arises from an issuer’s ability to make interest and principal payments when due, as well as the prices of bonds declining when an issuer’s credit quality is expected to deteriorate. Interest rate risk occurs when interest rates rise causing bond prices to fall. The Fund’s income could decline during periods of falling interest rates. Non-U.S. investments involve risks such as currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These fixed-income underlying funds risks, such as call, extension, and income volatility risks as well as other risk considerations, such as active management risk, equity underlying funds risks and direct real estate risks, are described in detail in the Fund’s prospectus. The principal value of the funds is not guaranteed at any time, including at the target-date.
You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call 877-518-9161, for a current prospectus that contains this and other information. Please read the prospectus carefully before investing.
The investment advisory services, strategies and expertise of TIAA Investments, a division of Nuveen, are provided by Teachers Advisors, LLC and TIAA-CREF Investment Management, LLC. Securities offered through Nuveen Securities, LLC, member FINRA and SIPC.