Target-Date Portfolios

The Target-Date Portfolios were created to further simplify investing for participants by providing a “cruise-control” investment alternative that is efficiently diversified among different asset classes, continually monitored, and professionally managed. Each portfolio is designed for a different age group, based upon an average retirement age of 55, and average life expectancy (currently age 85), which appropriately allocates investments during the working years and the retirement years. Every portfolio contains a mix of different types of mutual funds (i.e aggressive and conservative, domestic and international), which are the same as those funds offered in Tier Two: Trustee-Selected Mutual Funds. Each pie chart shown below represents one of the portfolios, with each slice of a pie chart representing a portion allocated to a specific mutual fund. The Plan’s investment consultant periodically reviews each portfolio and modifies the investment allocations so they become more conservative as the investors age.

Choosing a Target-Date Portfolio

Although professionally-managed portfolios are quite common options among retirement plans, numerous studies, including a recent analysis of the City of Aurora-Police MPPP, indicate most participants do not select appropriate portfolios. These Target-Date Portfolios were designed to help employees easily select the correct option by dividing them into various age groups. Participants simply choose the portfolio that matches their age group and leave the rest to the Plan’s investment professionals.

Currently, there are seven portfolios, which are illustrated below. The first three are very conservative, with smaller allocations to stocks, and are designed for participants already in retirement. The other portfolios are intended for participants that are one to forty years from retirement, and have greater allocations to stocks. To choose the proper portfolio, simply find the age group that matches your current age. For example, the 2020 Portfolio is designed for employees ages 38 to 47. The name “2020 Portfolio” indicates the year a participant in the middle of the age group 40 to 49 (in this case, age 45) will reach the average retirement age of 55. However, the portfolios are generally designed for participants reaching age 55 within five years either side (5 years younger, or 5 years older) of the target retirement year.

Growth Investments

International Growth:

International Value:

Small-Cap Value:

Mid-Cap Growth:

Large-Cap Growth:

Large-Cap Core:

Large-Cap Value:

Alternatives:

High Yield Bond:

Income Investments

Core Bonds & TIPS:

Stable Value:

15%

60%

Growth Investments

International Growth:

International Value:

Small-Cap Value:

Mid-Cap Growth:

Large-Cap Growth:

Large-Cap Core:

Large-Cap Value:

Alternatives:

High Yield Bond:

Income Investments

Core Bonds & TIPS:

Stable Value:

20%

42%

Target 1990

Target 2000

Age Group: Over 69

Age Group: 60-69

Growth Investments

International Growth:

International Value:

Small-Cap Value:

Mid-Cap Growth:

Large-Cap Growth:

Large-Cap Core:

Large-Cap Value:

Alternatives:

High Yield Bond:

Income Investments

Core Bonds & TIPS:

Stable Value:

25%

22%

Growth Investments

International Growth:

International Value:

Small-Cap Value:

Mid-Cap Growth:

Large-Cap Growth:

Large-Cap Core:

Large-Cap Value:

Alternatives:

High Yield Bond:

Income Investments

Core Bonds & TIPS:

Stable Value:

11%

10%

23%

11%

Target 2010

Target 2020

Age Group: 50-59

Age Group: 40-49

Growth Investments

International Growth:

International Value:

Small-Cap Value:

Mid-Cap Growth:

Large-Cap Growth:

Large-Cap Core:

Large-Cap Value:

Alternatives:

High Yield Bond:

Income Investments

Core Bonds & TIPS:

Stable Value:

13%

12%

11%

12%

19%

Growth Investments

International Growth:

International Value:

Small-Cap Value:

Mid-Cap Growth:

Large-Cap Growth:

Large-Cap Core:

Large-Cap Value:

Alternatives:

High Yield Bond:

Income Investments

Core Bonds & TIPS:

Stable Value:

15%

14%

12%

14%

10%

Target 2030

Target 2040

Age Group: 30-39

Age Group: Under 30

Growth Investments

International Growth:

International Value:

Small-Cap Value:

Mid-Cap Growth:

Large-Cap Growth:

Large-Cap Core:

Large-Cap Value:

Alternatives:

High Yield Bond:

Income Investments

Core Bonds & TIPS:

Stable Value:

16%

14%

12%

14%

11%

Target 2050

Age Group: Under 24

Unique Design and Purpose

These portfolios are unique in their design and purpose because they are dynamic, rather than static. Although many retirement plans offer a series of professionally-designed portfolios, they are generally static, which requires the participant to choose the appropriate initial portfolio, based upon risk tolerance, then change to more conservative portfolios over time. Therefore, participants are responsible for correctly identifying risk tolerance and taking the initiative to change portfolios periodically.