What are target date funds and how do they work?
OPERS Target Date Funds are diversified investment options that automatically change their asset allocation over time, to become more conservative as you get closer to retirement. This is done by shifting the amount of money that is invested in stocks versus money invested in bonds and cash.
Target Date Funds share the common goal of generating returns (more money invested in stocks from youth to middle age) and then preserving principal (more money invested in bonds and cash) as retirement approaches.
What investments are in the Target Date Funds?
The target date funds will be made up of a mixture of the six core OPERS investment options:
What are the names of the Target Date Funds?
How do I make changes to the investments inside my MD or CO plan?
In order to change the investments in your account, you will need to call 1-866-673-7748 or you can make changes through your Online Account on our website if you are registered. If you have not yet registered for your Online Account, you will need to contact the number above to request a Password.
Once signed in to your Online Account (To change your investments):
- Click the "My contributions" link
- Then, click the "View Your Account Balances" link
- Then, click the "Manage Investments" link on the left hand column
- You then need to do two things with your account if you currently have pre-mixed portfolios.
- Click "Change elections" link, this will change where your future contributions are allocated
- Then, click "fund transfer" link, this will enable you to move money currently in the pre-mixed portfolios out of them and into a target date fund(s) or any of our six core fund(s).
What happens if I keep working and go past my target retirement date?
When you choose a target date fund (For example: the OPERS Target 2025 Fund), If you are still working when it becomes the year 2025, your target date fund will have reached its maturity and will convert into the OPERS Target Payout Fund (most conservative target date fund, but it does not mean you have to start taking your money out).
If you continue to work you can either leave your money in the Target Payout Fund or you can choose to move your money into another OPERS Target Date Fund or any of our six core funds.
I would like to be actively involved in managing my account. If I do not want a TDF what are my options?
You are still free to choose any combination of the investment options that we offer.
Can I draw money out of a TDF as a retiree when the date has not yet happened? (For example, can I draw out of a 2040 fund during the year 2035?)
Absolutely, once you have retired, you can begin withdrawing money out of OPERS (upon completion and approval of your retirement application) no matter which of the investment options you are invested in.
Who manages the Target Date Fund investments?
The same investment professionals who currently manage the six core OPERS investment options. OPERS' investment staff and consultant will manage the transitions (glide path) to more conservative (bonds and cash) allocations over time.
How do I decide which OPERS Target Date Fund is right for me?
To decide which target date fund is right for you, determine the year in which you think you will retire and/or begin taking distributions from your account. Choose the target date fund that is closest to that date.
(Keep in mind these target date funds and their corresponding asset allocations were developed with the idea that this is an individual's only source of retirement income. When choosing a target date fund remember to consider if it is an appropriate fit with your overall financial retirement plan.)
Are there any extra fees or expenses to invest in the OPERS Target Date Funds?
No. The only fees or expenses charged for the OPERS Target Date Funds will be the expenses associated with the corresponding OPERS investment options that comprise the target date funds. (See Morningstar Fund Profile for expense ratio)
Can I invest in more than one OPERS Target Date Fund at a time?
Yes, however we encourage you to select and invest in the OPERS Target Date Fund that corresponds most closely to the year that you expect to retire or begin taking distributions.
If the OPERS Target Date Fund that is most suitable for your retirement date is not aggressive or conservative enough for you, you could select a slightly more aggressive or conservative Target Date Fund or alternatively you could look at putting a portion of your contributions into one of the OPERS equity investment options (more aggressive) or our bond or stable value fund (more conservative).
How can I find out what the benchmarks are for the Target Date Funds?
You can view the benchmarks for each of the funds on their individual Morningstar' Fund Profile or on the monthly Total Fund Returns.
How often do the Target Date Funds rebalance?
The Target Date Funds will automatically rebalance quarterly. You do not have to do a thing.
What is a Glide Path?
It is a formula that determines the asset allocation mix of a target date fund, based on the number of years until the target date. The further out the target date the more aggressive the ratio (OPERS Target 2050 Fund 90% vs. 10%) of equities to fixed income.
As the target date approaches, the ratio of equities to fixed income becomes more conservative (40 years from now this same fund will be 45% equities and 55% fixed income). OPERS Target Date Funds glide path will change every five years.
What is the default OPERS investment option?
If you do not select an investment option, your OPERS contributions will be invested in the target date fund that is closest to the year in which you will turn 65. (For example: Your birth year was 1971, in 2036 you will be 65, so you would be placed in the OPERS Target Date 2035 Fund).
What should I do if the date in which I plan on retiring and/or taking a distribution from my account falls in between two Target Date Funds? Which should I choose? (My target date is 2017, should I choose the 2015 or 2020 Target Date Fund?)
You should choose the target date fund that is closest to the date in which you are retiring. In the example above, that would be 2015; or you might consider dividing your contributions equally between the two Target Date Funds that bracket your retirement date. In the example above, that would be 50% in the 2015 and 50% in the 2020 funds.
How did OPERS decide what was the appropriate ratio of stocks vs. bonds & cash in the Target Date Funds?
When determining the appropriate ratio of stocks vs. bonds & cash in the underlying allocation percentages, Mercer (OPERS Investment Consultant) and OPERS staff assumed that the OPERS Retirement Plan was a member's only source of retirement income. In order to maximize the needed replacement income at retirement and minimize the downside risks, Mercer and OPERS staff reviewed many simulations until they decided on the investment allocations.
I feel I have a very low/high tolerance for risk. Should this affect which Target Date Fund I should choose?
The target date funds were designed with suitable risk levels associated with the retirement date they represent. However, if you are not comfortable with the amount of risk associated with your target date fund. You may adjust the amount of risk you are willing to take on by picking a target date that is further out (more aggressive) or picking a target date that is closer to today's date (more conservative).
What is the Target Payout Fund?
The payout fund is the most conservative of the target date funds. It has a mix of approximately 30% equities and 70% fixed income type investments. The payout fund was designed to be the fund your money will be in after you begin the distribution or "payout" phase.
When the target date fund that you are invested in comes to maturity it will convert into the OPERS Target Payout Fund. (For example: when you are initially hired you select the OPERS Target 2035 Fund. When it becomes 2035, the fund will convert into the OPERS Target Payout Fund).
Retiring doesn't automatically put you in the OPERS Target Payout Fund. You have to either voluntarily move your money to this fund or the target date fund that you are in has to reach its maturity.
How can I follow the returns on my Target Date Fund(s)?