Off-the-shelf target date funds offer a convenient and cost effective solution for retirement saving that works well for most participants and employers. Yet some plan sponsors believe that their plan has unique features that require a customized solution.
Here we highlight the 3-prong framework we use to evaluate and model the impact of customization:
Evaluate the Ecosystem: We begin by assessing the sponsor’s objectives and the context — or ecosystem — in which a target date fund operates, including its benefits structure, participant demographics and investment philosophy.
Determine the Customizable Options: Pending the appropriateness of a custom solution, we explore the plan dimensions available for customization, and the potential benefits yielded.
Model the Solution: Starting with our standard glidepath, we assess a range of options to ensure customizations are differentiating, impactful and consistent across the plan.
Evaluating the Retirement Ecosystem
Before creating a custom glidepath for a target date fund, it is important to have a clear understanding of the context in which the glidepath will be implemented and the objectives that the plan sponsor is trying to achieve.