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New AllianceBernstein Research Finds Target-date Fund (TDF) Availability Increases In DC Plans, But Majority Of Plan Sponsors Are Not Making It The Default

Education Is Not Always the Answer: The research also shows that despite increases in the utilization and appeal of TDFs, participants continue to have striking misconceptions about them.

  • Myth 1 - Account balance is guaranteed: While 67% of TDF users understand the asset-allocation strategy (or glide path) associated with this type of investment, 34% said they believe their TDF account balance is guaranteed never to go down.
  • Myth 2 - Sufficient income is guaranteed: 37% of participants surveyed said they believe a TDF guarantees that their income needs will be met in retirement.

Healy explains, "While participants continue to have misconceptions about certain TDF features, our research suggests that it's unclear whether more education is the solution. The reality is that Accidental investors often don't want to understand how investments work - they just want to know they do work."

Income Is the New Outcome: Many participants also show a strong desire for lifetime income solutions in their TDFs.

  • What employees want most: 67% of participants said the single most important feature they want from their DC plan is a steady income stream in retirement.
  • Strong appeal for secure income TDFs: Nearly 80% of current TDF users found a TDF with secure income stream features appealing - as did 53% of non-TDF users and 47% of non-plan participants.

Healy concludes, "It's clear from our research that making their savings last a lifetime is top of mind for many employees. The focus is evolving from just wealth accumulation to wealth accumulation and retirement income."

About the Survey

AllianceBernstein's DC team has conducted annual surveys of employees since 2005 and biannual surveys of plan sponsors since 2006. These surveys help us enhance our DC plan solutions, ultimately helping plan sponsors understand how to lead participants to better savings outcomes and more comfortable retirements. This year's plan participant survey was conducted online in February 2012 with 1,002 respondents who were full-time employees at least 18 years of age and working for companies that offered DC plans. Our latest plan sponsor survey was conducted online in November 2011, and included 1,018 respondents nationwide, representing small plans (with assets of less than $1 million), midsize plans (with assets between $1 million and $249 million) and large plans (with assets of $250 million or more).

About AllianceBernstein

AllianceBernstein is a leading global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals and private clients in major world markets. As of September 30, 2012, AllianceBernstein Holding L.P. (NYSE: AB) owned approximately 37.9% of the issued and outstanding AllianceBernstein Units and AXA, one of the largest global financial-services organizations, owned an approximate 64.2% economic interest in AllianceBernstein. Additional information about AllianceBernstein may be found on our website, www.alliancebernstein.com.

 

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