BlackRock has launched what it describes as the industry’s only suite of target date ETFs created for the roughly 57 million Americans who lack access to a 401(k) or employer-sponsored retirement plan.
According to the announcement, the iShares LifePath Target Date ETFs invest in a broad portfolio of underlying iShares ETFs and are designed to help investors stay on the path to retirement by adjusting over time, taking more risk early on, and gradually becoming more conservative as the target retirement date approaches.
At the target retirement date, the ETFs are expected to transition into the iShares Target Retirement ETF. BlackRock notes that this suite of funds is intended to help investors in many ways, including those who:
- Want to do more, but don’t have access to a workplace retirement plan.
- Are looking to bolster their planning by complementing an existing 401(k).
- Want to roll out of a 401(k) plan into an IRA with a familiar, time-tested strategy and investment choice.
According to a chart provided by BlackRock, the fund fees and expenses range from a low 0.08% for the iShares LifePath Retirement EFT to a high of 0.11% for the iShares LifePath Target Date ETFs with vintage dates from 2040 to 2065.
“This product innovation will make saving for retirement even more accessible at a time when Americans are less confident about their retirement readiness than ever before,” stated Anne Ackerley, head of Retirement at BlackRock. “With nearly 50% of private sector workers unable to save through their employers, lack of access to a retirement savings plan is one of the most pressing challenges that needs to be addressed.”
“Since pioneering the first target date fund 30 years ago, BlackRock has continually transformed what it means to save for retirement for over 40 million Americans, providing optimized retirement income, emergency savings support, and more,” added Nick Nefouse, Global Head of Retirement Solutions at BlackRock. “With LifePath's investment approach now accessible through the ETF structure, BlackRock is helping to lead the industry in retirement innovation.”
Crisis in Retirement Confidence
The announcement comes as the firm also released its 8th annual BlackRock Read on Retirement report showing that retirement confidence has dropped, with nearly 40% of independent savers, or individuals who do not have access to a retirement plan through their employers, feeling off track for retirement. This marks a 23% increase since last year, the report notes.
In addition, 47% of independent savers are leaning on cash to build their retirement nest eggs, missing out on potential investment growth that could be important to achieving their retirement goals.
However, nearly half (45%) of these independent savers say that having access to a financial professional or advice would help them feel on track for retirement, and a large majority (71%) say they would be interested in using a target date fund to save for retirement.
These concerns aren’t just limited to those without a retirement plan. According to the report, only slightly more than half (56%) of workplace savers feel on track to retire with the lifestyle they want—a double-digit drop compared to last year and a worrisome trend since 2021 when 68% reported that they feel on track. Encouragingly, though, this drop in confidence hasn’t translated to a decrease in saving rates, Blackrock notes.
Plan sponsors are also reporting on the effects that compounding economic forces have had on their savers. In fact, 3 in 4 plan sponsors say they are worried about inflation eroding their participants’ retirement savings. In addition, only 46% of plan sponsors are “highly confident” in the ability of their participants to stay on track during a period of market volatility.
The BlackRock Read on Retirement report provides insights from a research study of over 450 large defined contribution plan sponsors, 1,300 workplace retirement plan savers, 1,300 independent savers and 300 retired workplace savers in the United States. The survey was executed by Escalent. Plan sponsors were interviewed using an online survey conducted between March 21 and April 6, 2023, while all other respondents were reached between April 24 and May 24, 2023.
