Shortfall risk of target-date funds during retirement

Target-date mutual funds are likely to increase in popularity because they are now one of the three approved default options for many retirement plans. In the retirement years, target-date funds become increasingly conservative with higher bond concentrations. Using a bootstrap simulation and rolling period analysis, three target-date fund classifications are shown to have higher probabilities of mnning out of money and lower balance remaining when compared to fixed allocation portfolios. A fixed 50/50 stoek/bond portfolio unambiguously out-performs the target-date funds, regardless of method- ology employed. In light of this evidence, these funds should revisit their asset allocation strategy.