<2> BlackRock’s Target-Date Funds to Take on More Risk in Midlife
<3> New Approach Could Boost Retirement Wealth, but Comes with Increased Volatility
As the world’s largest asset manager, BlackRock has been a major player in the target-date fund (TDF) market for years. These funds are designed to automatically adjust their asset allocation based on the investor’s retirement date, with the goal of providing a steady stream of income in retirement. However, BlackRock has announced a significant change to its TDF strategy, which could have a major impact on investors.
<3> What’s Changing?
BlackRock has decided to increase the risk level of its TDFs between the ages of 45 and 60. This means that investors in this age range can expect their funds to take on more stocks and fewer bonds, in an effort to generate higher returns. According to BlackRock, this new approach could result in greater retirement wealth for investors about 75% of the time.
<3> The Rationale Behind the Change
BlackRock’s decision to increase the risk level of its TDFs is based on the idea that investors have a longer time horizon between the ages of 45 and 60. This means that they can afford to