Even with the exponential growth and popularity of TDFs — and maybe because of it — columnist Ronald l. Delegge cautions advisors about the dangers in a recent article on AdvisorOne. Delegge’s concerns include:
• TDFs make people lazy, with 25% of participants relying on them solely — a 600% increase over the last five years — and making them believe they have a customized solution.
• TDFs don’t address the longevity issues — that is, getting more conservative closer to retirement — thus exposing people to inflation risks.
• They undermine the advisor.
• Some are not well diversified.
Delegge concedes that TDFs are better than nothing, but suggests that other solutions — like an advisor-driven customized solution — might be better. What about LDI?
