I am a big fan of default investments, such as target date funds (TDFs), because of the way they have improved the average participant's investment profile. However, recent results from an AllianceBernstein study indicate that the impressions people have regarding what a TDF does for you, and more importantly what it doesn’t do for you, are significantly distorted among 30-40% of participants who use them.
The key concern is that many people feel they are guaranteed to not lose value. Furthermore, many believe the target date year indicates the approximate time the retirement account is sufficiently funded for retirement. Defaulting people into investments they don’t really investigate before buying is certainly part of the problem. We need to significantly boost education around TDFs so that people will understand what they bought and not be set up for a potentially huge disappointment.