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Under the hood, target date funds monitor four key risks that savers face: how long you’ll live, how much you earn and can put away, market risk, and inflation.
They automatically rebalance risk levels over time, so that the only decision a saver needs to make is “what’s my target date?” (the date you plan to retire).
Before target date funds, individual investors had to decide which funds to hold and how to balance their portfolios against risk. Most 401(k) savers flocked to either mutual funds or stable value strategies – often with unintended consequences.
The industry was slow to embrace target date funds, but they have since become the most common default option in DC plans.1 Morningstar has gone so far as to call them “the best development for investors since the index fund.”2
LifePath® pioneered a strategy that handled portfolio decisions throughout a saver’s, well, life path. Simple and cost-effective, it was the first 401(k) solution to consider not only the investments themselves, but also how and why individuals make the investment decisions they do, providing them with the opportunity to achieve better outcomes.
As we think about the next 30 years of target date funds, we intend to uphold the legacy we’ve built. We’re focused on meeting the needs of the individual – equipping them with today’s tools for tomorrow’s retirement.
| Category | AUM |
|---|---|
| 1993 | 0 |
| 1994 | 44352533 |
| 1995 | 127098754 |
| 1996 | 318856198 |
| 1997 | 483938419 |
| 1998 | 622690285 |
| 1999 | 484503233 |
| 2000 | 527661000 |
| 2001 | 675543000 |
| 2002 | 607724258 |
| 2003 | 968945499 |
| 2004 | 1313487391 |
| 2005 | 1841841706 |
| 2006 | 2372937497 |
| 2007 | 3992779645 |
| 2008 | 6251780106 |
| 2009 | 2898643292 |
| 2010 | 14693044315 |
| 2011 | 44431567635 |
| 2012 | 64308011852 |
| 2013 | 103464000000 |
| 2014 | 120378000000 |
| 2015 | 125960000000 |
| 2016 | 151326000000 |
| 2017 | 206169000000 |
| 2018 | 209384000000 |
| 2019 | 279117000000 |
| 2020 | 339909000000 |
| 2021 | 420502000000 |
| 2022 | 373247000000 |
| 2023 | 427858000000 |
BlackRock and Morningstar Direct as of August 2023. Assets under management (AUM) shown includes both mutual fund and collective trust fund assets.
We’ve made it easier and simpler for people to be invested during the course of their life, and I'm really proud that BlackRock pioneered this revolutionary vehicle.
With 30 years of practice now under our belt, we’ve gotten more and more precise in bringing this vision to life. What began as the idea that a cohort of savers would benefit from professionally managed investment solutions has become a sophisticated franchise designed to help meet precise individual needs.
With LifePath, our investment philosophy has always been to build holistic solutions that provide consistent spending to and through retirement. That’s why we continually monitor the key risks that matter at various stages of the retirement journey – from longevity and savings risks to market and purchasing power risks. In today’s environment of heightened inflation and growing demand for retirement spending solutions, these core beliefs are even more important.
For most people, the point of saving for retirement is so you can stop working someday. That's why LifePath's investment objective is to support consistent spending in retirement. It's been that way since day one - and it's a big piece of what sets us apart.
Most target date funds on the market today aim to address a single variable – like wealth accumulation or principal protection. These are relatively easy to define because they’re one-dimensional. The problem is: Retirement is multi-dimensional.
That’s why we study income profiles, life expectancy, risk aversion, and more. By incorporating these considerations into our investment philosophy, LifePath puts the individual at the heart of our investment process.
Income profiles sourced from local labor market and government datasets
Mortality expectations sourced from local resources and datasets
Capital market assumptions based on local investor perspective using local currency
BlackRock worked with the Bipartisan Policy Center to lift the veil on how to optimize retirement income – and the role policymakers have to play in advancing financial security.
BlackRock offers a range of solutions that simplify access to lifetime income, including innovative tools, resources, and research-driven investment insights.
1 Cerulli, U.S. Defined Contribution Distribution, 2022.
2 Morningstar, “Are Target Date Funds Good Investments,” 2022.
3 Morningstar, Mind the Gap, 2022.
4 Morningstar, How Do Investor Returns Stack Up Against Total Returns?, 2020.
5 BlackRock, Read on Retirement™ survey, 2023.
Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the BlackRock Fund prospectus pages. Read the prospectus carefully before investing.
The BlackRock Read on Retirement™ report provides insights from a research study of over 450 large defined contribution plan sponsors, 1,300 workplace retirement plan savers, 1,300 independent savers and 300 retired workplace savers in the United States. The survey is executed by Escalent, an independent research company. Plan sponsors were interviewed using an online survey conducted between March 21 and April 6, 2023, while all other respondents were reached between April 24 and May 24, 2023.
This material is provided for educational purposes only and should not be construed as research. The information presented is not a complete analysis of the global retirement landscape. The opinions expressed herein are subject to change at any time due to changes in the market, the economic or regulatory environment or for other reasons.
The material does not constitute investment, legal, tax or other advice and is not to be relied on in making an investment or other decision.
The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock, Inc. and/or its subsidiaries (together, “BlackRock”) to be reliable. No representation is made that this information is accurate or complete. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.
Investing involves risk, including possible loss of principal.
The target date in the fund name is the approximate date an investor plans to start withdrawing money. The principal value is not guaranteed at any time, including at the target date.
Asset allocation models and diversification do not promise any level of performance or guarantee against loss of principal.
No part of this material may be reproduced, stored in any retrieval system or transmitted in any form or by any means, electronic, mechanical, recording or otherwise, without the prior written consent of BlackRock. This publication is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
© 2024 BlackRock, Inc or its affiliates. All Rights Reserved. BLACKROCK, LIFEPATH, and READ ON RETIREMENT are trademarks of BlackRock, Inc or its affiliates. All other trademarks are those of their respective owners.
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