The set-it-and-forget-it retirement fund option suddenly gave investors a wake-up call.
The Callan Target Date Index posted a return of minus 0.86 percent for 2015, its first annual loss since 2008, the investment consultant reported Tuesday.
These funds get their name from the year in which an investor anticipates retiring. The assets gradually move from riskier investments — which come with the potential for higher returns — to more conservative options, such as bonds and cash, as it nears the targeted retirement date.
They have become the go-to option for many workers. They also increasingly are the default option for many 401(k) plans when an enrollee does not specify investment choices.
Longer-dated funds with the greatest equity exposure — geared toward younger workers — were hit the hardest.
That means an average participant in their 20s in the worst performing 2055 target date fund, which is considered a long-dated fund, notched about an $800 loss in their account balance last year, said Lori Lucas, head of Callan's Defined Contribution practice.