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Target Date funds took a beating in 2011 with performance lagging the S+P.  Target date funds are supposed to be a retirement planning tool but are not always living up to expectations.

From a recent Wall Street Journal article,

“We had a real stress test in the first nine months of 2011, and the industry failed,” says Ron Surz, a retirement plan consultant and president of Target Date Solutions. He adds that the returns would have been much worse, but strong gains in the fourth quarter “bailed the industry out.”

I’m not sure about you, but I don’t think my retirement should be subject to a stress test that failed.

Annuities have been around for a long time, and the insurance industry is specifically designed to counter these sorts of risks.  Mainstream media doesn’t like annuities, but they should.


AllianceBernstein’s 2015 Retirement Strategy fund lost nearly 3% for the year, landing it near the bottom of the 2015 class of 40 funds. The poor performance was due in part to the fund’s higher allocation to international stocks than its peers, in a year when U.S. markets outperformed others around the globe by significant margins, says Christopher Nikolich, the head of research and investment design for AllianceBernstein’s defined-contribution portfolios.

Meanwhile, the Goldman Sachs Retirement Strategies 2015 fund lost about 4%. While the fund’s equity allocation is close to the 2015 group’s average of 56%, it too also included riskier stocks, including emerging-market picks, says Mr. Charlson. A spokeswoman for Goldman Sachs Asset Management declined to comment.

To be sure, the losses have not been as steep as those seen in 2008, when the average 2010 fund plunged 30%. Many of the funds responded to widespread criticism from regulators and lawmakers by further decreasing their stock holdings as the retirement target approaches. Still, the average fund nearing retirement today has 40% of its assets in stocks, down only 3 percentage points from 2008, according to data provided by Lipper.

Read more of the article here:

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“For all time periods and for all portfolios, the addition of the annuity leads to a decline in the portfolio failure rates.”

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