BLACKROCK RETIREMENT
Not slowing down: 30 years of LifePath® target date funds
Life doesn’t slow down at retirement. After 30 years, neither will we.
In the 30 years since we pioneered target date funds, we’ve continually evolved our LifePath franchise to help deliver the retirement outcomes participants need. So when they do retire, they can do so on their own terms. Whether that means slowing down – or not.
LifePath has always been built around participant needs. And we continue to innovate to help stay ahead of them – which means we aren’t slowing down any time soon.
LifePath TDFs don’t just work – they work for you.
Under the hood, target date funds monitor four key risks that savers face: how long you’ll live, how much you earn and can put away, market risk, and inflation.
They automatically rebalance risk levels over time, so that the only decision a saver needs to make is “what’s my target date” (the date you plan to retire).
Today 36 million people use target date funds
Target date funds have come a long way. From humble beginnings in an industry that was slow to embrace them, target date funds have become the most common default option in DC plans.1 Morningstar has gone so far as to call them “the best development for investors since the index fund.”2
In the time before target date funds, individual investors had to decide which funds to hold and how to balance their portfolios against risk. Most 401(k) savers flocked to either mutual funds or stable value strategies – often with unintended consequences.
LifePath was the first of a new type of strategy that handled portfolio decisions through time for savers – and the first 401(k) product to address both investment and behavioral considerations, providing individuals with the opportunity to achieve better investment outcomes through a simple and cost-effective solution.
60%
of 401(k) plan participants are invested in a target date fund.
9
countries where BlackRock offers LifePath target date funds.
30
years of innovation since LifePath, the first target date fund, was pioneered in 1993.
With a $450 billion global franchise, LifePath has transformed what it means to save for retirement
As we think about the next 30 years of target date funds, we intend to uphold the legacy we’ve built. We’re focused on meeting the needs of the individual – equipping them with today’s tools for tomorrow’s retirement.
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LifePath Assets Under Management, US and CA 1993-2023
BlackRock and Morningstar Direct as of August 2023. Assets under management (AUM) shown includes both mutual fund and collective trust fund assets.
“
We’ve made it easier and simpler for people to be invested during the course of their life, and I'm really proud that BlackRock pioneered this revolutionary vehicle.
Anne Ackerley
LifePath. We’ve worked for you. For 30 years.
With 30 years of practice now under our belt, we’ve gotten more and more precise in bringing this vision to life. What began as the idea that a cohort of savers would benefit from professionally managed investment solutions has become a sophisticated franchise designed to help meet precise individual needs.
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Putting the target in target date funds
With LifePath, our investment philosophy has always been to build holistic solutions that provide consistent spending to and through retirement. That’s why we continually monitor the key risks that matter at various stages of the retirement journey – from longevity and savings risks to market and purchasing power risks. In today’s environment of heightened inflation and growing demand for retirement spending solutions, these core beliefs are even more important.
For most people, the point of saving for retirement is so you can stop working someday. That's why LifePath's investment objective is to support consistent spending in retirement. It's been that way since day one - and it's a big piece of what sets us apart.
Nick Nefouse
Most target date funds on the market today aim to address a single variable – like wealth accumulation or principal protection. These are relatively easy to define because they’re one-dimensional. The problem is: Retirement is multi-dimensional.
That’s why we study income profiles, life expectancy, risk aversion, and more. By incorporating these considerations into our investment philosophy, LifePath uniquely incorporates the individual at the heart of our investment process.
Our lifecycle model integrates data with investor preferences
Income
Income profiles sourced from local labor market and government datasets
Life expectancy
Mortality expectations sourced from local resources and datasets
Market returns & volatility
Capital market assumptions based on local investor perspective using local currency
Moving toward an even more targeted future
Several studies confirm that target date funds’ do-it-for-me approach has been associated with good outcomes for investors.3 A 2020 Morningstar research report found that target date funds’ dollar-weighted returns outweighed the funds’ total returns.4 And our own analysis indicates that, by adjusting for risk efficiently over a lifecycle, the LifePath glidepath has performed better than average in terms of building balances at age 65, while affording the lowest portfolio risk at this critical point in life (when balances are at their highest and most capital is at risk).
LifePath Mutual Fund K Share Performance in Equity Market Drawdowns
|
Event |
Timing |
LifePath Retirement |
Sample Balanced |
+/- |
|
Emerging markets volatility |
5/1/2015-9/30/2015 |
-4.32% |
-7.88% |
+3.56 |
|
2018 Fed tightening |
8/1/2018-12/31/2018 |
-4.26% |
-8.95% |
+4.69 |
|
Coronavirus pandemic |
2/1/2020-3/31/2020 |
-8.30% |
-16.45% |
+8.15 |
|
Russia/Ukraine war & inflation |
1/1/2022-12/31/2022 |
-15.20% |
-17.50% |
+2.00 |
Source: BlackRock, Morningstar as of 30 Sept 2023. Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Refer to www.blackrock.com for current month-end returns. Drawdowns calculated using monthly returns. Drawdown periods represent the trough of each drawdown. LifePath Retirement represented by the LifePath Index MF Retirement vintage K share class. Index performance returns do not reflect any management fees, transaction costs, or expenses. Returns include reinvestment of dividends and capital gains. All data series utilizes monthly returns. Asset allocation for the sample balanced fund includes the following assumptions: S&P 500 Index, 50%; MSCI ACWI ex-USA IMI Index,25%; Bloomberg U.S. Aggregate Bond Index, 25%. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an index. The modeled index-based results do not represent the performance of an actual fund or account. No representation is made that the outcomes illustrated will be achieved by any strategy.
For standardized average annual total returns for the fund click here
But that’s not to suggest that our work here is done. Today, we are focused on investors’ current needs – and those we anticipate investors having in the future.
According to our 2023 Read on Retirement™ survey, just 21% of workplace savers are very confident that they will have enough money to last through retirement.5 Encouragingly, the same survey found that almost all (98%) of employers feel responsible for helping their participants generate income in retirement. Less encouragingly – most don’t feel highly confident that their plan can.
