The Target Date Choice to Help Keep Retirement Goals on Track
Voya’s target date funds are designed to specifically balance the evolving risk-return profiles of participants as they age to help maximize the probability of a successful retirement. The target date in the funds’ name is the approximate date when investors plan to start withdrawing their money. These funds satisfy the criteria for qualified default investment alternatives (QDIAs).
Participant Focused
Glide Path
Seeks to maximize wealth
in early years and reduce
risk in later years
More equity relative to peers
in early years, less equity relative
to peers in later years†
Multi-Manager*
Voya is a pioneer of the
multi-manager Target Date
approach, with 10 years+
of experience
Access to Voya's investment
capabilities and other well-recognized
asset managers
Active/Passive Blend
Active managers may offer the
potential for excess returns in
less efficient asset classes
Passive managers may offer
cost effective exposure to highly
efficient asset classes within
a competitive fee structure
† Between 50-40 years out from the fund’s ‘target date’ the Voya target date funds allocate 95% to equities compared to the industry average of 89%. At the ‘target date’ the Voya target date funds allocate 35% to equities compared to the industry average of 42%. Source: Morningstar. Average includes all mutual fund and VP target date suites in Morningstar. Equity allocations based on Years to Target (YTT) Stock glide path data in Morningstar® Direct.
* Multi-Manger refers to the use of investment managers including Voya Investment Management and outside managers, which may be offered through affiliated sub-advised funds. The target date funds have a 50% cap on the use of unaffiliated funds.
A Portfolio that Adjusts as Your Career Progresses
The Portfolio may periodically deviate from the Target Allocation, generally within the range of +/- 10% relative to the current Target Allocation. The sub-adviser may determine to deviate by a wider margin in order to protect the Portfolio, achieve its investment objective, or to take advantage of particular opportunities. This chart is for illustrative purposes only and may not reflect the current allocations of the Voya Target Solution Trust Series. This illustration is intended to show how the Voya Target Solution Trust Series transitions over time.
Participant Focused Glide Path Design
Maximizing Accumulation Potential in the Early Years, Protecting Wealth in the Later Years
At Voya, our glide path relative to peers has a higher equity allocation for younger participants to build wealth and a lower equity allocation for participants near and in retirement to reduce risk in those critical years. Younger participants can afford to take on more investment risk in exchange for greater potential returns. However, in the later years, participants are more vulnerable to a market downturn, particularly the day they retire given:
- Account balances are generally at their highest
- Contributions end and withdrawals begin
- Retirees have the longest period of time to fund expenses without a salary
As a result, avoiding large drawdowns in the early stages of retirement is critical to the longevity of assets. To illustrate this, the table below shows a hypothetical example of the impact of a 20% loss at different ages in retirement, all else being equal. As the table shows, a retiree who experiences a 20% loss at age 66 depletes their assets almost 10 years earlier than a retiree who experiences a 20% loss at age 85. This supports having a conservative equity allocation near and at retirement.
| Case for Conservative Approach at Retirement | |||
|---|---|---|---|
| Retirees are the Most Vulnerable on the Day they Retire | Retiree 1 -20% Shock at Age 66 |
Retiree 2 -20% Shock at Age 75 |
Retiree 3 -20% Shock at Age 85 |
| Retirement Age 65 | $500,000 | $500,000 | $500,000 |
| Age When Experienced -20% Shock | 66 | 75 | 85 |
| Impact to Balance after -20% Shock | -$120,000 | -$102,404 | -$75,334 |
| Age When Savings Run Out | 87 | 91 | 95 |
Source: Voya Investment Management
Managing Volatility with a Broad Set of Asset Classes
Effective target date portfolio management goes beyond determining the optimal equity and bond mix over a participant’s lifecycle. Determining which sub-asset classes to use in order to implement an equity and bond mix is equally important. Accordingly, sub-asset class breadth and how the sub-asset classes are adjusted to manage the various risks that a participant faces are also critical for a plan sponsor to understand and evaluate.
At Voya, we deliver broader exposure to a diverse set of asset classes designed seeking to generate more consistent investment outcomes for participants.
There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio.
Voya's Multi-Manager* Approach
Voya target date suites combine the strength of Voya’s investment capabilities with other well-recognized investment managers from across the industry. To select and monitor managers, Voya has a dedicated team of career analysts with close to 20 years of experience. This multi-manager approach offers access to over 15 investment firms, highlighted below, to enhance diversification and reduce single manager risk.
Voya’s Intelligent Blend of Active and Passive
At Voya, we believe there is an advantage to utilizing a mix of both active and passive managers within our target date suites. The decision to use active or passive managers depends on many factors including the excess return potential for each asset class and the market environment.
| Active vs. Passive Considerations | Voya's Approach |
|---|---|
| Highly Efficient Asset Classes (U.S. large equities) |
Higher allocation to passive or low tracking error strategies |
| Less Efficient Asset Classes (International, EM) |
Higher allocation to active |
| Asset classes that are difficult/costly to replicate passively (Fixed Income, Commodities) |
Higher allocation to active |
| Different Market Environments (Passive equity tends to outperform active when markets rally but underperform when markets sell off) |
Best of both worlds approach - more flexibility to achieve better investment outcomes |
Participation in a Collective Trust Fund is limited to eligible trusts that are accepted by the Trustee as Participating Trusts. Eligible trusts generally include (i) certain employee benefit trusts exempt from federal income taxation under Code Section 501(a); (ii) certain governmental plans or units described in Code Section 414(d), Code Section 457(b), and Code Section 818 (a) (6); (iii) certain commingled trust funds exempt from federal income taxation under Code Section 501(a); and (iv) certain insurance company separate accounts as defined in the Investment Company Act section 2(a) (17). Neither the fund nor units of beneficial interest in the fund are registered under the Investment Company Act of 1940 or the Securities Act of 1933 in reliance on an exemption, under these acts applicable to collective trust funds maintained by a bank for certain types of employee benefit trusts.
A collective fund is not a mutual fund; the collective investment trust fund is managed by Voya Investment Trust Co. There is no guarantee the fund will achieve its objective.
There is no guarantee that any investment option will achieve its stated objective. Principal value fluctuates and there is no guarantee of value at any time, including the target date.
The “target date” is the approximate date when an investor plans to start withdrawing their money. When their target date is reached, they may have more or less than the original amount invested. For each target-date portfolio, until the day prior to its target date, the portfolio will seek to provide total returns consistent with an asset allocation targeted for an investor who is retiring in approximately each portfolio’s designated target year. On the target date, the portfolio will seek to provide a combination of total return and stability of principal.
Stocks are more volatile than bonds, and portfolios with a higher concentration of stocks are more likely to experience greater fluctuations in value than portfolios with a higher concentration in bonds. Foreign stocks and small- and mid-cap stocks may be more volatile than large-cap stocks. Investing in bonds also, entails credit risk and interest rate risk. Generally investors with longer timeframes can consider assuming more risk in their investment portfolio.
As with any portfolio, you could lose money on your investment in a Voya target date fund. Although the strategy seeks to optimize risk-adjusted returns given various time horizons, you still may lose money and experience volatility. Forward looking asset class assumptions and market judgment are used to form the asset allocations for the Voya target date fund. There is risk that you could achieve better returns in an underlying portfolio or other portfolios representing a single asset class than in the Voya target date fund. Important factors to consider when planning for retirement include your expected expenses, sources of income, and available assets. Before investing in the Voya target date fund, weigh your objectives, time horizon, and risk tolerance. The Voya target date fund invests in many underlying portfolios which are exposed to the risks of different areas of the market. The higher a portfolio’s allocation to stocks, the greater the risk. Diversification cannot assure a profit or protect against loss in a declining market.