A comparison of three funds
The retirement savings plan DCP has 20 investment funds available to customers. Let’s take a look at three of them now. The following table shows investment performance over time for three DCP funds.
DCP investment performance (as of March 31, 2022)
|Investment option||3 month||1 year||3 year||5 year||10 year/ since inception|
|2045 Retirement Strategy Fund||-4.71%||5.97%||12.82%||11.11%||9.87%|
|Retirement Maturity Strategy Fund||-3.50%||2.27%||6.74%||5.96%||5.24%|
This is the lowest risk fund for DCP. It is also the lowest potential for growth. Look at the percentage of growth over the last 10 years, 1.67%. This performance is not much more than a high-yield savings account. When might you use this fund? Customers put funds in the Savings Pool when they don’t want them to change—this could be right before retirement, when customers plan to use the funds within the next few years, or when using the funds to purchase an annuity. The funds stay invested, but the potential for a balance increase or decrease is lowest.
2045 Retirement Strategy Fund
The 2045 fund is one of the target date funds offered by DRS. These funds are curated for customers based on the number of years they have before they start withdrawing funds. If you are earlier in your career, the funds have a higher mix of higher risk assets with the potential for greater growth. As you approach retirement age, the risk is lowered for you so your investments have the potential for more stability. In the table above, the 2045 fund is showing a negative performance over 3 months. However, if you look at the fund over time, you can see the average growth potential has been much higher for this fund.
Retirement Maturity Strategy Fund
Did you know? Target date funds also retire. The maturity fund is where target date funds are moved when they extend beyond the retirement dates. It is the lowest risk version of the target date funds but still remains invested in the market to increase the opportunity for growth in case you live to be 100. For example, the next investment to enter this fund will be the 2010 fund. The risk for this fund falls somewhere between the Savings Pool and the 2045 fund. At 5.24%, you can see the 10 year growth shows a moderate amount of growth history. Typically when a target date fund reaches the end of its risk cycle, it becomes identical to this fund and target date customers are automatically moved to this fund when their date fund retires.
Past performance can’t tell you the future. No one knows what will happen next with the market. However, there are varying levels of risk in the assets that make up each fund. Looking at performance can help you determine the potential risk/reward balance of each fund and compare it to the risk level you are comfortable with at this point in your career. Past performance can help you determine what is “normal” behavior for an investment.
Can DRS give me investment advice?
No. While DRS and the investment account record keeper can provide you with information about investments, we cannot offer investment advice. If you are still not sure which investment approach might be right for you, talk with your financial advisor. To find out more about each fund, see each investment’s Fund Fact Sheet (linked within each plan’s section). These fact sheets are prepared by the fund managers and contain information about performance, asset mixes and the goals of the fund.
Did you know?
Almost 60% of plan participants saving for retirement want a nest-egg of $500,000 or more. Only 14% currently have at least $500,000 saved.
Only 31% of plan participants meet with a financial advisor to discuss how they can reach their financial goals.
Source: AllianceBernstein research 2021
So, where to next?
- View your DCP or Plan 3 account to check in on your investment selections.
- See this 2 minute video about target date funds.
- Get a 30 minute overview with this Investment 101 webinar.
- Find out more about DCP and Plan 3 investments on your plan page.