At Retirement Income Symposium, T. Rowe Price Defends Target-Date Funds

"Once the regulators and legislators heard about the benefits and how they actually worked, they became satisfied and comfortable with them for the general public," he said. "But the consumer press has not, and that's where a lot of the controversy still comes from."

He then ticked off the "benefits" to which he referred, including:

• Turnkey solution for plan sponsors and participants
• Age appropriate asset allocation
• Broadly diversified portfolios
• Ongoing account rebalancing and reallocation
• Addresses longevity, market and inflation risk
• Automatic "default" solutions address behavioral issues
• Automatic enrollment
• Automatic investing

The main issue, he said, is understanding and accurately developing suitable "glide path" structures, or the allocation adjustments needed as retirement approaches.

"The question becomes a question of allocating 'to retirement' or 'through retirement'," Lee said.  "Too many target-date funds only get the shareholder to a specified retirement date. But the client will still unquestionably need to be invested throughout their retirement. We think the 'through retirement' model is superior, and that's why our target date funds work so well."

"To" fundsare designed for an investor who expects to spend all or most of his or her money in the fund at the target date. This strategy focuses on providing more certainty in anticipation of a rapid drawdown of assets in retirement. It's a strategy that is typically associated with a lower equity allocation.

"Through" fundsare designed for an investor who plans to withdraw the value of the investor's account in the fund gradually after retirement.This strategy focuses on providing an income stream throughout a long retirement. A "Through" strategy is typically associated with a higher equity allocation.