A Primer on Easy-to-Use 401(k) Funds
An increasing number of 401(k) participants are enrolling in so-called "lifecycle" funds, whether by choice or by default.
There is a small share of workers who are offered a 401(k) plan, but don't bother to fill out the paperwork or enroll. Companies select a default option for those workers, and a relatively new Labor Department regulation requires that those funds fall into one of three categories: a life -cycle fund, a balanced fund or a managed account. Life -cycle funds start out primarily weighted in equities, but shift allocation to less-risky holdings as participants approach retirement. Such plans make sense for hands-off investors whose companies offer a 401(k) or who want to plan for retirement, but don't want to be bothered with specific investment decisions.
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