DC language study: Positioning target date/risk funds

Our 2021 DC language study took a closer look at the language of defined contribution (DC) plans. Alongside Maslansky + Partners, a communications and research strategy firm, we conducted a national survey of 997 large-plan participants to highlight how the right language could help plan sponsors engage, inform, and motivate employees to save for retirement. 

There’s clear interest for both target date funds (TDFs) and target risk funds (TRFs) on the investment menu: Almost 70% of participants we surveyed preferred the option of investing in both professionally managed options compared to single asset class options. Offering TDFs, TRFs, and single asset class options allows participants of all ages to choose an option that best fits their investing profile and objectives.

When ranking the top benefits of both TDFs and TRFs, participants cited “fully diversified” as the most compelling benefit (34%), with “automatically rebalancing” least compelling (9%). As for who they want to manage their retirement investments, and the best way to describe what they do, participants want their money to be “managed” by “financial experts” or “financial professionals, ” with “institutional managers” who “construct” their portfolios coming in dead last. Ultimately, we found that participants preferred plain-spoken language and were turned off by industry jargon.

So, what’s the best way to position both target risk and target date funds on the investment menu for better understanding? Simple framing makes it easier for participants to compare investment options. Use short, easy-to-understand descriptors, and consider a goals-based (versus time-based) approach to differentiate target risk funds on the menu.