401k Planning: To Retirement or Through Retirement?

A question garnering lots of attention these days in defined contribution (DC) retirement circles is: should 401k planning and investment strategies focus on getting participants to retirement or through retirement? Mostly, this question is asked in relation to the appropriate risk exposures assumed by "target date funds" (TDF's). These are the default investment option for many 401ks - i.e. where the money goes if no other investment choices are made.

But the to or through consideration also provides a helpful framework for understanding how individuals view 401k's and how they view 401k planning in general. Everyone has their own thoughts of what retirement should be so there are no right or wrong answers. Reflecting on the to retirement or through retirement question is a useful exercise that can help you clarify these thoughts. Below are some things to consider:

Issue	My 401k Planning Focus is on Getting To Retirement	My 401k Planning Focus is on Getting Through Retirement
Retirement Goal	Focus is on living well during early retirement years, perhaps using big share of 401k savings to indulge in a major purchase such as a new motorhome.	Focus is on not outliving savings and, perhaps, guaranteeing a lifetime retirement income stream.
401k Plan Participation	Most 401k participants quit employer-sponsored 401k's when they retire and rollover assets to an IRA.	Benefits of being a "participant for life" in your employer's 401k after retirement may include lower management/investment costs and better investment choices.
Sales Pitch	401k rollovers are a major source of revenue for mutual funds and investment advisors. There is considerable sales pressure to get participants to rollover their accounts.	Plan sponsors are recognizing the value of keeping participants after they retire - more assets can equate to lower fees and management costs. Also, sponsors are providing low-risk annuity products that guarantee lifetime income.
Investment Risk Posture	Low (or no) exposure to equities as retirement age nears. Example glidepath: 40% cash; 60% US Treasury inflation protected securities (TIPS). Goal is to preserve capital even through a market melt-down like that experienced in 2008.	Maintain equity exposure throughout retirement, recognizing that equities historically produce highest return over long-term. Example glidepath: 65% equities at age 65; 35% at 80; 20% at 90.