A Word From Human Resources
Target Date Funds Approach to Investing
With the ongoing market turmoil, some of us may want to pull the covers over our heads and wait until it is over. So what is a prudent investor to do? At Rensselaer, selecting the target date funds that are being offered by TIAA-CREF and Fidelity may be an option.
Target date funds, also known as age-based or life cycle funds, use a person’s estimated retirement year to invest their money. Each person selects the target date fund that corresponds most closely to the year they believe they will enter retirement, or begin using their money. For example, for a person invested in the 2020 target date fund, a more conservative investment mix may be used, based on an individual retiring in 2020, and assuming that the individual will leave their money invested during retirement.
Planning for a successful retirement requires developing an appropriate investment portfolio and overall savings habits.
Instead of assembling and managing a portfolio on your own, individuals invest in a single fund that will decide the right mix of stocks, bonds, and cash, based on your retirement date, or “target date.” Over the years, the managers of the funds will adjust the asset allocation based on the targeted retirement date, and move to a more conservative allocation over time. Overall, the funds address one of the most critical and difficult decisions individuals have to make by investing an individual’s account across different asset classes or funds.
It is important to keep in mind that selecting this investment method does not ensure you will have adequate retirement savings. Planning for a successful retirement requires developing an appropriate investment portfolio and overall savings habits. For example, a goal of saving 10 percent of your pay is a good step forward in planning for your future. At Rensselaer, with the 8 percent employer contribution and the 1 percent employee contribution, individuals can include an additional 1 percent by enrolling in one of the Supplemental Retirement Annuity plans.
As with all investments, individuals should carefully consider if target date funds would fit their retirement investment needs. No single approach is suitable for all investors. While target date funds offer a simple solution to investing, we hope that individuals will consider their retirement goals, time frame, and an interest in actively managing their account.
To make an appointment with a representative from TIAA-CREF or Fidelity, and to learn more about target date funds, call the Division of Human Resources at (518) 276-6302.
Curtis Powell, SPHR
Vice President for Human Resources