Investment Assistance via Managed Accounts, TDFs

If your 401(k) plan offers participants the opportunity to invest in a managed account or a target-date fund (TDF), yours is among the majority. These options give employees access to professional investment assistance, which in turn, may help them achieve higher returns, according to a recent paper.

93% of companies offer TDFs and 58% offer managed accounts in a defined contribution account, thereby providing professional investment assistance. Among these plans, 12% of employees are enrolled in a managed account, and 42% are full TDF users, according to the results.

What impact does participating in a TDF or managed account have on employee account balances? The survey found that, over the most recent 10-year period, ¼ of participants who did not use professional investment assistance (ie, by investing in a managed account or investing at least 95% in a TDF) saw investment returns that were 2% or less on an annualized basis. However, among workers invested in a managed account or at least 95% invested in a TDF, just 4% saw investment returns of 2% or less.

Learn more about how professional investment assistance affects participant account balances in The Impact of Managed Accounts and Target Date Funds in Defined Contribution Plans, 2007-2016 from Alight Solutions.