08 | 4 | 2005 Posted By Jerry Kalish
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Consider Some Equity Exposure for Your Defined Contribution Default Fund, says Vanguard

If you are a 401(k) plan sponsor, what should be your "default" fund, the investment fund used for those participants who fail to make a choice either for their own or employer contributions?

Conventional wisdom has been to use a fixed income fund such as a money market or the guaranteed fund. Vanguard's Center for Retirement Research now suggests a different approach in its recently released report, Selecting a Default Fund for a Defined Contribution Plan. Vanguard suggests that plan sponsors consider selecting a default fund that has some level of equity exposure.

The 20-page report just issued by the Vanguard Center for Retirement Research:

  • provides data on the current default investment options chosen by plan sponsors,
  • considers the legal and investment aspects of the default choice, and
  • provides a decision making framework for plan fiduciaries when selecting a default, as well as recommendations for policymakers.

Click here for a copy of the report.