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Rekenthaler Report

Target-Date Funds: The Triumph of Academia

What the behavioral economists advocated 20 years ago is today’s 401(k) reality.

More or Less?
In the 1990s, 401(k) plans hit early adulthood and faced a life decision. They could continue to gain complexity, by giving employees additional investment options such as specialized funds and open brokerage platforms. Or, they could reverse their recent course and simplify. Perhaps less would be best.

I made my call. Late in the decade, I submitted a guest column for a 401(k) trade website, stating that expansion was inevitable. As 401(k) balances grew, and employees became more financially sophisticated, they would no longer be satisfied with the basics. Rather, they would demand full investment freedom: The ability to invest where they wished. The history of the mutual fund industry was the history of doing more. The 401(k) business would be no exception.