Two options for one-stop investing

Do you feel overwhelmed by the responsibility of selecting and monitoring your retirement plan investment options? If so, you are not alone. More and more, retirement plan participants are looking for simple investment solutions that will help them build a secure retirement.

To help ease the decision-making process for retirement plan participants, plan sponsors are increasingly offering new simplified investment options. Two of the most popular types of “one-stop” funds are commonly referred to as “life-style” and “life-cycle” funds.

Investing in a life-cycle fund (also known as a "target-date" fund) is as simple as picking the fund closest to the year you want to retire. By selecting a life-cycle fund you are investing in a single diversified fund designed to meet your investment time horizon.

Life-cycle funds are traditionally reallocated as the fund approaches its target date to reflect an increasingly conservative asset mix (e.g., an increased amount of the funds’ assets are moved from equity to fixed income funds). In this way, the overall risk of the fund is reduced as your time remaining until retirement becomes shorter. The funds are also rebalanced on an ongoing basis to maintain a target balance between asset classes.

A life-style fund (sometimes called a "risk-based" fund) may be right for you if you are uncomfortable making ongoing investment decisions but have a feel for how much risk you are comfortable taking with your retirement plan investments. When you select a life-style fund, you are investing in a single diversified fund designed to meet your investment risk tolerance.

Life-style funds are also rebalanced on an ongoing basis to maintain a target balance between asset classes. However, unlike life-cycle funds, the life-style funds’ asset allocation mix will not become more conservative as you approach retirement. You are responsible for moving your assets to another investment option as your tolerance for risk changes.

For more information on whether the above one-stop investing options are right for you, or to obtain more information on ICMA-RC’s life-style funds, the Vantagepoint Milestone Funds, or life-cycle funds, Vantagepoint Model Portfolio Funds, please visit our Web site at www.icmarc.org or contact our Investor Services staff at 1-800-669-7400. Remember, not all plan sponsors offer these funds, so be sure to check with your benefits office or our Investor Services representatives.