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Opinion
Allison Schrager

The Fatal Flaw in Your Retirement Plan’s Target Date Funds

The life-cycle portfolios that have become so common in 401(k)s will leave retirees unprotected from inflation and short on income in the long run.

Your retirement plan may put a crimp in your spending plans.

Your retirement plan may put a crimp in your spending plans.

Photographer: Garry Hogg/Hulton Archive via Getty Images

There was a major development in 2006 that transformed how Americans invest for retirement. It solved one problem, but created another that will be causing extra pain to people who retire in this economy. 

The mid-2000s was the start of the nudge revolution, where policy makers thought they could coax people into more desirable behavior. The idea seemed especially promising when it came to saving for retirement, where research showed that automatically enrolling people in retirement accounts would increase saving and lead to better investment decisions.