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For institutional investor use only. Not for use with or distribution to the public.

Target Date Plus Calculator

A next-generation
default solution

What if you could combine the benefits of a Target Date Option, with the ability to help reduce interest rate risk, plus provide the opportunity to provide lifetime income?

Consider the “plus” of lifetime income

What if you could offer participants the benefits of a target date structure, plus a component that can provide lifetime income in retirement? A Target Date Plus strategy combines the familiar structure of a target date option with a fully liquid fixed annuity component, which can provide lifetime income in retirement.

Target Date Plus Fundamentals

  • Age-based asset allocation

  • Becomes more conservative as retirement date nears

  • Asset allocation typically consists of equity and fixed-income investments and can also include variable annuities

  • QDIA eligible

The “plus” can be the added component of a fixed annuity to offer lifetime income.*

* Annuity account options are available through contracts issued by insurance companies. These contracts are designed for retirement or other long-term goals, and may offer a variety of income options, including lifetime income.

The fixed annuity component:
  • Allows principal and earnings to grow—guaranteed—even in the most volatile financial markets.
  • Will not see declines in value due to rising interest rates. This is important to participants nearing retirement who typically have larger fixed allocations.
  • Provides an option for guaranteed monthly income payments for life in retirement.**

** Any guarantees under annuities issued are subject to the claims-paying ability of the issuer.

Target Date Plus is an asset allocation concept that combines the advantages of a Target Date solution with a guaranteed fixed annuity. In this concept the bond allocation in the Target Date solution is replaced with a guaranteed fixed annuity.

The next evolution: Taking the benefits of target date options and making them better

Target date funds have become the predominant QDIA and thereby one of the most popular investment options. They offer a single, prepackaged vehicle to provide both stock and bond investments that change over time. While they have many benefits, they do have some shortcomings, including the inability to offer guaranteed lifetime income.

Traditional target date funds may offer the following benefits:
  • Ease of use
  • Turnkey: Glidepath and allocations determined by fund manager
  • Become more conservative over time
  • Auto rebalancing of portfolio
  • Single Net Asset Value to monitor performance
  • QDIA eligible
However, they may fall short in a number of ways:
  • No control over underlying options
  • No control over glidepath
  • Large bond exposure at target date may expose participants to interest rate risk
  • No lifetime income component
  • One size fits all — regardless of risk tolerance or wealth accumulated

Enter/choose your plan demographic averages

We can use Monte Carlo simulation to compare a Target Date option to the Target Date Plus solution.

  • Either use the defaults provided below or change the numbers to be more representative of participants you work with.
  • When you’re ready select the calculate results to see the probability of successfully meeting the stated inflation adjusted income in retirement and the range of outcomes around the ending account balance for both options.
Age
18
55
Compensation
$25k
$275k
Employee and employer combined contribution rates
3%
20%

The projected inflation adjusted compensation at age 65 is

Annual Income Need
(in retirement)*
$6k
$300k

*Annual Income Need (in retirement) is in future dollars.


Calculate Results

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