A new analysis of 401(k) investor behavior finds that the vast majority of participants fully invested in target date funds tend to stay there. But a meaningful share, particularly those approaching retirement, are stepping off the glide path and making significant changes to their equity exposure.
The research from by the Investment Company Institute, tracked 700,000 consistent 401(k) plan participants who had 100% of their account balances in target date funds at year-end 2016. By year-end 2022, 85% remained fully invested in TDFs. The findings draw from the EBRI/ICI 401(k) database, which covers participants across plans of all sizes.
The staying power of TDFs is notable given how much the retirement landscape shifted during the six-year window. Markets swung sharply, the pandemic reshaped workforce behavior, and interest rates moved from historic lows to multi-decade highs. Yet the data suggest most participants simply stayed the course.
Persistence was highest among mid-tenured workers. Among participants in their 50s with five to ten years on the job, 88% remained fully TDF-invested through 2022 compared with 82% of those with two years or less of tenure and 80% of those with more than 30 years.
The researchers attribute this partly to timing: workers hired after the Pension Protection Act of 2006 were more likely to have been automatically enrolled with a TDF as the default investment, meaning their initial allocation may have been passive rather than deliberate.
"The durability of target date funds reflects the value participants place on their intuitive, age-based investment approach," said Shelly Antoniewicz, ICI Chief Economist. "Their ability to simplify long-term investing has made TDFs a standard option in many 401(k) plan investment lineups."
The most striking pattern in the data involves participants in their 60s. While all age groups showed some movement away from TDFs, the oldest cohort was by far the most likely to exit them entirely rather than reduce their allocation gradually.
Among full-TDF investors in their 60s at year-end 2016, 11% had moved to a 0% TDF allocation by year-end 2022 — roughly double the rate seen in every other age group.
The pattern held across tenure groups, suggesting age is driving the behavior more than how long someone has worked for their employer.
The researchers interpret this as evidence that workers nearing retirement are seeking greater control over their portfolios, wanting to tailor their asset allocation to their specific income needs and risk tolerance rather than stay locked into a predetermined glide path.
Younger participants who moved away from TDFs behaved differently. Rather than exiting completely, they tended to shift to a partial TDF allocation, retaining some exposure while adjusting the mix.
When participants did leave their full-TDF positions, the adjustments to equity exposure varied sharply by age. Among participants in their 60s who moved away from TDFs, 47% increased their equity allocation by 20 percentage points or more, while 32% cut equity exposure by a similar margin. That divergence — some reaching for more growth, others pulling back aggressively — reflects the wide range of individual retirement strategies that TDF glide paths, by their nature, cannot accommodate.
Among participants in their 50s who exited full-TDF positions, 41% stayed within a similar equity range, while 28% moved up and 31% moved down, including 12% who held no equities at all.
Across all age groups, 8% of participants who left a full-TDF allocation ended up with zero equity exposure in the year they moved. That figure climbed to 17% among those in their 60s.
"Target date funds have evolved with the goal of helping employees save and invest for their retirement," said Craig Copeland, EBRI Director of Wealth Benefits Research. "As more individuals invest in TDFs in their 401(k) plans, our research shows that most remain invested in them over time, helping them continue to have a diversified investment strategy while accounting for income needs as they move closer to and into retirement."
The durability TDFs demonstrate in the ICI data has not gone unnoticed by the asset management industry.
A Deloitte analysis reported on by InvestmentNews earlier this month projects that private capital allocations within 401(k) and 403(b) plans could reach 6% of total plan assets by 2030 (more than $1 trillion) and that TDFs are expected to be the primary delivery mechanism.
The structural logic tracks directly with what the ICI research shows: because TDFs function as the dominant default vehicle and most participants never touch them, even a modest private capital sleeve embedded in a TDF can drive enormous asset flows with little active decision-making required from participants.
The Deloitte research noted that a March 2026 Department of Labor proposed rule introduced a process-based safe harbor allowing plan fiduciaries to evaluate private capital alongside conventional options, removing the litigation risk that had long kept plan sponsors away. The same inertia that keeps 85% of TDF investors on the glide path could soon mean passive exposure to private equity and credit, not by choice, but by default.
The findings point to a retirement system in which TDFs are doing much of what they were designed to do: keeping most investors on a consistent, professionally managed path. But they also reveal the limits of a one-size-fits-all structure for workers whose financial situations grow more individual and more urgent as retirement approaches.
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