DEFINED CONTRIBUTION INSIGHTS | October 2016
Intermediaries have a new way to differentiate themselves and increase the value they deliver to their clients. The new American Funds Target Date ProView℠ tool provides a fast, powerful online platform to analyze and compare target date fund series to help make an appropriate selection for a DC plan’s participants.
DEFINED CONTRIBUTION INSIGHTS | September 2016
DEFINED CONTRIBUTION INSIGHTS | August 2016
We believe that target date series should feature not only a gradual reduction in equities over time, but also a gradual shift in the nature of that equity exposure. This transition, which we call recharacterizing the equity exposure, effectively creates a “glide path within a glide path” that can help lower volatility.
American Funds portfolio manager Brad Vogt explains the importance of the right target date series to help investors pursue their retirement goals. Beyond the glide path, a good evaluation process should include an examination of the underlying funds and the purpose each serves over the long-term.
DEFINED CONTRIBUTION INSIGHTS | July 2016
The decline of defined benefit plans and the rise of defined contribution plans have created dilemmas for both plan sponsors and participants. Although they had their own disadvantages, DB plans make saving fairly easy for participants; DB participants are automatically enrolled and don’t have to make any investment decisions. With the growth of DC, much of that responsibility has shifted to participants, with mixed results. However, there are steps DC plan sponsors can take to seek the best of both the DB and DC worlds. By incorporating aspects of defined benefit plans into a DC plan design, plan sponsors can strive to address the following problems that many DC participants face:
DEFINED CONTRIBUTION INSIGHTS | January 2016
Given the rapid acceptance of target date funds (TDFs) as the primary retirement investment strategy for American workers, the choice of target date provider is now among the most important decisions for an investment committee.
The beauty of a TDF is its simplicity for participants. However, its underlying complexity can challenge committees tasked with assessing a TDF’s glide path design, risk/return profile and fee structure as part of fiduciary due diligence.
One of the considerations is whether the TDF should be actively or passively managed. In either case, appropriate due diligence must be conducted. When selecting a TDF provider, sponsors should remember:
DEFINED CONTRIBUTION INSIGHTS | June 2015
Plan fiduciaries devote significant time and resources to educating participants about the importance of saving for retirement.
Despite this effort and the care that goes into making a well-balanced menu of investment options available to all participants, many participant allocations are at odds with their retirement needs.
DEFINED CONTRIBUTION INSIGHTS | March 2015
Wesley Phoa, portfolio manager, target date and fixed-Income funds, 21 years of experience.
Jason Bortz, ERISA attorney, 17 years of experience.
Toni Brown, CFA senior defined contribution specialist, 25 years of experience.
John Doyle, senior defined contribution specialist, 28 years of experience.
Rich Lang, investment specialist, 21 years of experience.
Target date funds have enormous potential to make defined contribution plans more effective and straightforward for participants. But to capture the funds’ benefits — and to help meet fiduciary obligations — plan sponsors must implement thorough, well-documented evaluation procedures.
DEFINED CONTRIBUTION INSIGHTS | September 2014
Exhibit 3: American Funds (R-3) vs. Relevant Index
In these videos, portfolio managers Jim Lovelace, Wesley Phoa and Brad Vogt discuss the American Funds Target Date Retirement Series.
DEFINED CONTRIBUTION INSIGHTS | August 2014
American Funds Target Date Retirement Series Glide Path
All target date series feature glide paths that reduce equities and simultaneously increase fixed income over time. American Funds Target Date Retirement Series® is distinguished by also featuring shifts in the nature of both the equity and the fixed-income exposure.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses or the funds’ characteristics statement, which can be obtained from a financial professional or your relationship manager, and should be read carefully before investing.
Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks.
The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. Investments in mortgage-related securities involve additional risks, such as prepayment risk, as more fully described in the prospectus. While not directly correlated to changes in interest rates, the values of inflation-linked bonds generally fluctuate in response to changes in real interest rates and may experience greater losses than other debt securities with similar durations.
Each target date fund is composed of a mix of American Funds and is subject to the risks and returns of the underlying funds. Underlying funds may be added or removed during the year. Although the target date funds are managed for investors on a projected retirement date time frame, the funds' allocation strategy does not guarantee that investors' retirement goals will be met. The target date is the year in which an investor is assumed to retire and begin taking withdrawals. American Funds investment professionals actively manage the target date fund's portfolio, moving it from a more growth-oriented strategy to a more income-oriented focus as the fund gets closer to its target date. Investment professionals continue to manage each fund for 30 years after it reaches its target date.
Fund shares of U.S. Government Securities Fund are not guaranteed by the U.S. government.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice. Investors should consult their tax or legal advisors.
The Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.