Target date fund overview
1994, the World Bank first put forward the concept of "three pillars" of the pension system. After years of system construction and improvement, the United States has gradually formed a pension system with social insurance, employer-supported retirement plans and personal savings pension accounts as its core. As the first pillar, social insurance is similar to China's basic old-age insurance and provided by the government. The second pillar is the retirement plan initiated by the employer, which is divided into DB (fixed income) plan and DC (fixed contribution) plan. Among them, there are four kinds of DC (defined deposit) plans, namely 40 1(K) plan, 403(b) plan, 457 plan and TSP (thrifty savings plan).
The third pillar is IRA (Individual Retirement Account), which is a special savings account. It allows you to deposit funds into your account regularly and then withdraw them after retirement. The Irish Republican Army, like DB and DC, can enjoy tax incentives. Before 1980, American residents mainly relied on defined benefit plans to obtain retirement protection. With the aging of the population structure, the cost of government and enterprises to invest in the pension system has increased, which makes the long-term debt responsibility of pension slowly shift from government and enterprises to individuals, that is, from "government pension" to "self-pension". Originally only auxiliary DC plan (fixed contribution initiated by employers) and IRA (individual retirement account) have gradually become the mainstream of individual retirement investment. The DC plan has increased from about 20% of 1974 to 46% now. 40 1(K) plan is the most important occupational annuity form in the American market at present. At the end of 20 18, 40 1(K) plan accounted for 69% of DC (defined deposit) plan.
In addition, in order to increase investors' participation in IRA (individual pension account) and avoid the imbalance of asset allocation caused by individual investors' "irrationality" and "inertia", which will lead to a sharp decline in long-term investment return, the US government promulgated the Pension Protection Act in 2006. The new bill raises the payment ceiling, encourages the use of the principle of "employees automatically joining", automatically increases the default contribution rate and increases the default portfolio selection, and the target date fund becomes one of the qualified default investment options of the pension plan. Target date fund is a "one-stop solution" developed by the same fund for the pension market. Because investors always forget to adjust the asset allocation in time, the target date fund "automatically" adjusts the asset allocation, so the target fund can develop rapidly. By the end of March 2020, the total size of the target date fund in the United States will reach $65,438 +0.9 trillion.