NEW YORK ( TheStreet ) -- Seeking to save for retirement, investors have poured money relentlessly into target-date funds. Assets in the funds now top $500 billion, up from $160 billion in 2008, according to the Investment Company Institute. With so much cash flowing into retirement funds, researchers are asking, if you invest faithfully in a target fund, will you have enough income to enjoy a secure retirement? The question is difficult to answer, but recent research by Morningstar suggests that most funds are on track to achieve their goals. Morningstar argues that the odds of success are greatest for funds from T. Rowe Price and other companies that follow relatively aggressive strategies. TCLOX), which has 88% of assets in stocks. A more cautious choice is Invesco Balanced-Risk Retirement 2040 ( TNDAX) with 16% in equities. To determine which strategies are more likely to succeed, Morningstar considered how a typical worker might fare. The researchers started with a hypothetical 23-year-old employee who earns $45,000 and saves 7% annually. The worker receives 2% annual pay increases until he retires at 65. In retirement, he will receive $37,350 (in today's dollars) from Social Security, and he needs to take $13,950 from the retirement-date fund to cover other costs. The researchers assumed that equities will return 8% annually, while fixed income will return 3.5%.
The T. Rowe Price portfolios had relatively high success rates. The hypothetical saver would run out of assets by age 95 in 38% of the scenarios. In comparison, savers in Fidelity's funds ran out of assets by age 95 in 43% of the scenarios. Morningstar argues that either company's approach is sound, but the researchers say that T. Rowe Price enjoys a slight advantage because the company has higher equity allocations. T. Rowe Price Retirement 2040 ( TRRDX) has 89% of assets in equities, compared with a figure of 72% for Fidelity Freedom 2040 ( FFFFX). Morningstar notes that the more aggressive approach comes with some disadvantages. The T. Rowe Price funds are relatively volatile, and they could lag if stocks move into a persistent bear market. Follow @StanLuxenberg This article was written by an independent contributor, separate from TheStreet's regular news coverage.