Following the 2008 crash, retirement plan advisors pushed to help employers and workers understand market risk.
For Pottichen, that means selecting target-date funds based on the demographics of a given employer.
For instance, an employer with an older population that has high savings rates and large balances might be better off with a target-date fund that is less aggressive, he said.
Employees are also coming to terms with the fact that while they can’t control market performance, they can control other aspects that will improve their retirement savings.
In that vein, employers have adopted automatic features to boost workers’ savings rates.
Automatic enrollment places workers into the retirement plan by default, while auto escalation boosts their contributions into the 401(k).
“It’s key to understand the role of target-date funds in your retirement success, versus your own role in saving for retirement,” said Holt.
“It should be clear that target-date funds aren’t immune to losses,” he said. “They weren’t in 2008 and they won’t be in 2018.”