TDFs Make a Lasting Impression

Looks like 401(k) participants are taking stick-to-it-ness to a new level, at least when it comes to target-date funds.

Just released research from the Employee Benefit Research Institute in Washington found that roughly 90 percent of those investing in target-date funds in 2007 stuck with them in 2009. The rate was even higher for those auto-enrolled in them—95 percent.

“Target-date funds are still very new in 401(k) plans, but these results suggest that once they are used, TDFs are very likely to continue to be used for a number of years afterward, certainly in the short term,” says Craig Copeland, senior research director at EBRI. 

EBRI’s research also includes some interesting demographic data, finding that younger 401(k) participants were more likely to use TDFs and to continue to use them than those who were older. 

No question TDFs are relatively new and there’s only so much one can read into just three years of data. (EBRI stresses that point in its press release.) But that said, the EBRI research does shed some important, much-needed light on what employers might expect as they add TDF options to their plans and implement and tweak features such as auto-enrollment in the months ahead.