Trends in retirement plan contributions and asset allocations by TIAA participants: 2012 to 2018

September 2020

Lifecycle funds, an auto-diversified target-date fund with an age-based glide path, are the investment of choice in an increasing share of participants.

Summary

Defined-contribution plan participants are responsible for deciding how to invest their account contributions and assets. Many workers, however, have difficulty making these decisions due to behavioral biases, a lack of financial literacy, or both. This paper examines how workers allocated their contributions and assets in employer-sponsored retirement plans within the TIAA system over the years 2012 to 2018.The findings provide insights into participants’ investment product preferences and risk profiles.

Key Insights

Younger participants are more likely to have defaulted into a Lifecycle fund and tend to use it as a single comprehensive fund-of-funds investment.

Older participants who invest in a Lifecycle fund tend to use it as part of a broader portfolio strategy.

Older workers, participants with longer TIAA system tenure, and higher asset participants are more likely to customize their investment portfolio across multiple asset classes and investment products.

Methodology

The authors analyzed administrative records to determine how TIAA system participants allocated their plan contributions and assets between 2012 and 2018. This analysis adds to previous studies documenting participant behavior dating back to 1986.