401(k) Investors Lack Understanding of Target-Date Funds and Managed Accounts, Reveals Cerulli Study

Amidst the landscape of retirement investments, there exists a notable lack of comprehension among 401(k) participants regarding the nuances between target-date funds and managed accounts, as outlined in a recent dossier by Cerulli Associates.

A substantial majority, comprising roughly two-thirds, exhibited uncertainty or misconception when tasked with discerning the precise definitions of these investment vehicles. Approximately 21% erroneously attributed to a target-date fund the function of accruing interest until redistributing its principal to shareholders at a predetermined future juncture. Similarly, nearly 17% incorrectly inferred that managed accounts were exclusively tendered by financial advisors distinct from their 401(k) plans.

However, participants evince a cognizance of their informational deficit, with 70% concurring that a financial specialist could proficiently steward their retirement assets.

The dossier, developed in collaboration with managed accounts provider Edelman Financial Engines, posits managed accounts as a viable recourse for 401(k) participants grappling with self-doubt in managing their retirement portfolios and yearning for personalized guidance.

In contradistinction to target-date funds, managed accounts furnish participants with access to human advisors.

Cerulli divulged that approximately half of the participants identified the prospect of consulting with a human advisor as one of the foremost advantageous facets of financial counsel.