The ideas presented ranged from the conventional to novel.  Many panelists warned against constraining how TDFs invest. As Edward Moslander of retirement giant TIAA-CREF noted, “there is no right or perfect glide path.” (Glide path is industry’s jargon for shifting the investment mix of a TDF over the life of the fund.) Some participants suggested that a partial annuitization of lifecycle funds would help protect savers from financial tsumanis like 2008.

Others had issues with the way TDFs are labeled.  For instance, it’s often unclear to the investor if the plan is designed for saving up “to” retirement, or “throughout” retirement. Also, some felt that employing a calendar year in the name of the TDF–as in a 2020 fund, designed for folks expecting to retire in 2020–is misleading, as Fund A’s 2020 fund may be much more aggressive than the 2020 fund from Fund B.

As for novel approaches, Michael Drew of Griffith Business School in Australia suggests that lifecycle funds may have it precisely wrong.  By preserving wealth in the later years, he notes that the saver is missing out on tremendous opportunity; current glide paths protect against the only most pessimistic scenarios. (And as we can see from 2008, some may not even do that very well). And one financial planner suggested that investors can’t base their risk tolerance only on age, a standard practice. A wealthy 25-year-old could have a portfolio of almost no stocks, and someone over fifty, trying to catch-up, might correctly weight his portfolio more aggressively than average for his age.

But almost all participants concurred that more investor education and transparency about TDFs would be a good start. A recent report from Janus Investments indicates that well over half of employees participating in retirement plans have misconceptions about TDFs. Among those misconceptions: They offer pension-like guarantees (they don’t), and they should be combined with other funds to properly diversify (they shouldn’t).–Chris Horymski