American Funds Target Date Retirement Series

The American Funds Target Date Retirement series continues to be a top choice for retirement savers. The series’ cheapest share classes continue to earn Morningstar Analyst Ratings of Gold, while its more expensive options are rated Silver or Bronze.

The series strikes a balance between the firm’s renowned bottom-up security selection and its increasingly more impressive asset-allocation research. In January 2020, American Funds’ parent Capital Group created the Target Date Solutions Committee to oversee this series and enhance its quantitative capabilities.

This foundational work has produced sensible changes to the glide path. In April 2021, the committee moved to increase the series’ geographic flexibility in its equity sleeve by trimming several region-specific strategies for more global, go-anywhere funds. In 2022, it made similar changes to the fixed-income portfolio to allow more flexibility to allocate to different credit sectors, like emerging-markets debt.

Letting the views of the underlying managers drive these allocations plays into the firm’s established strengths. Deep and highly specialized analyst teams that span the globe back the underlying strategies, and the firm’s portfolio managers have strong pedigrees. Morningstar Medalists account for more than 90% of the series’ assets, a remarkable feat considering it consists entirely of actively managed funds. Its equity or allocation strategies’ cheapest shares all earn Analyst Ratings of Gold or Silver, and the fixed-income funds pair nicely with the equity sleeve.

The series’ nuanced glide path design creates differing performance outcomes across its vintages. The longest-dated portfolios lean into the firm’s growth strategies, while the vintages closest to retirement emphasize equity income, producing more of a value tilt relative to their respective S&P Target Date benchmarks. This positioning did lead to the further-dated vintages generally underperforming in 2022, but those investors have long time horizons to make up those losses. More importantly, investors nearing retirement with their nest eggs at or near their highest levels did avoid the worst of 2022′s equity and bond market selloff because of the value tilt.

Investors saving for retirement should continue to be well-served by this series.

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