Target-date retirement series offered by different asset managers share many features in common, but no two are exactly alike. In some cases, the differences can be hard to see. That can make it more challenging to select the series that’s right for the goals of the plan and its participants.
TargetDateVisualizer™ helps to reveal differences in target-date series. It focuses on the glide path used by different asset managers, which determines the asset allocation of each vintage of a series. The tool can help plan sponsors to identify a target-date series appropriate to the philosophy and goals of their plan.
IMPORTANT: The projections generated by TargetDateVisualizer™ are hypothetical in nature. They are not guarantees of future results, and the results may vary with each use and over time.
TargetDateVisualizer™ is an interactive investment tool designed for plan sponsors, consultants, and financial advisors. It is important to note that the results from this tool are estimates based on the most recent data entered. The results are not a guarantee of actual outcomes and will change as your inputs change.
The tool works by analyzing the glide path, the formula that determines the asset allocation of each vintage within a target-date series. The analysis focuses on two parts of the glide path, the vintage farthest from retirement and the vintage closest to retirement.
The tool uses a simple framework, asking the users to answer three questions. The questions are intended to frame how much equity exposure/risk a target-date vintage should have at these important inflection points along the glide path.
Question 1: What should a glide path favor early in a participant’s working life?
Question 2: What should a glide path favor as a participant nears retirement?
Question 3: In terms of income and wealth, what is most important for a target-date glide path to provide participants?
The tool filters the universe of target-date series by a returns-based calculation of equity exposure/risk. Target-date vintages are sorted by a trailing 36-month regression versus global equities (represented by the MSCI All-Country World Index). Trailing beta from the regression is then normalized as a percentile within each universe (vintage farthest from retirement and vintage closest to retirement), with a higher trailing equity beta translating into a higher percentile score. Target-date managers are then placed on an XY scatter chart, based on their respective vintage ranks (vintage closest to retirement is on the X axis, and vintage farthest from retirement is on the Y axis).
The answers to questions 1 and 2 are scored on a scale of 1 through 5. The answer to question 3 is used to make a final adjustment of the previous questions and is scored in 1-point increments of -1, 0, and 1: -1 for “sufficient income in retirement,” 0 for “balance of income in retirement and ending wealth,” and 1 for “maximum ending wealth.”
The final score can theoretically range from 0 to 6, in 1-point increments, and is calculated as follows:
Early accumulation result is derived as,
Near retirement date result is derived as,
The results are combined to focus on a specific quadrant (i.e., top-left, top-right, bottom-left, bottom-right).
Top-left quadrant: Target-date series that have above-average equity exposure in the farthest from retirement vintage and below-average equity exposure in the closest to retirement vintage.
Top-right quadrant: Target-date series that have above-average equity exposure both in the farthest from retirement vintage and closest to retirement vintage.
Bottom-left quadrant: Target-date series that have below-average equity exposure both in the farthest from retirement vintage and closest to retirement vintage.
Bottom-right quadrant: Target-date series that have below-average equity exposure in the farthest from retirement vintage and above-average equity exposure near the closest to retirement vintage.
We are not responsible for the accuracy of the data provided by you, or third parties. As the recipient of this information, you assume full responsibility for using the information, and you understand and agree that we and our affiliates are neither responsible nor liable for any claim, loss, or damage resulting from its use.
We periodically review the tool's methodology and reserve the right to change the methodology at any time based on numerous factors, including, but not limited to, current market and portfolio assumptions.
The information provided is intended to serve as an educational tool and is for informational purposes only. It is not intended to provide and should not be relied upon for investment, financial, legal, or tax advice. All figures and projections, simulations, and outcomes are hypothetical and do not reflect actual investment results. Past performance is not a guarantee of future results.
|Glide path type|
|Average manager tenure (years)|
|Total assets (millions)|
|Equity at start|
|Equity at retirement|
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For informational purposes only. Not an investment recommendation.
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