That means the rule-breakers are doing better than the rule-followers. What gives?
That means the rule-breakers are doing better than the rule-followers. What gives?
One theory is that TDF-plus investors save more, because they're simply more engaged with their 401(k)s. To take the TDF-and-then-some approach, you'd have to log in and actively change your 401(k) investment picks. And if you're the type of person who chooses to adjust their investments away from the default settings, maybe you're also the kind of person who will increase your contribution rate.
On the other hand, 401(k) savers who stick with their default TDF investment -- and their default contribution rates -- probably end up saving less.
However, the evidence seems to show that with appropriate education and guidance, participants can potentially have success with a "TDF-plus" approach to asset allocation.
-- State of the Participant 2021, John Hancock
The takeaway here is twofold. One, you can follow a TDF-plus strategy as long as you are comfortable with how it affects your risk and growth prospects -- in good and bad market climates. If you're not sure about that, stick with the TDF as your sole position.
Two -- and this one is more important -- be an active manager of your 401(k) to raise your retirement readiness. Budget and then set your contribution rate as high as you can afford. Watch your investment results. Look to understand the positions within your TDF, how they contribute to performance, and how the fund's allocations change over time.