FAQ
Dimensional Management DC invests participants' DC accounts towards a targeted retirement income. Are participants given guidelines to determine that retirement income goal?
Yes. Participants select their chosen retirement income goal from a range of possible outcomes. The income target range is based on four factors:
Yes. Participants select their chosen retirement income goal from a range of possible outcomes. The income target range is based on four factors:
- Current assets in the participant's DC plan, plus contributions he or she is expected to make in the future
- Projected returns on investing these assets
- Projected prices of a lifelong, inflation-linked annuity
- Social Security benefits, which are incorporated into the asset management algorithm
How are assets invested?
We build individualized portfolios for all participants to maximize the likelihood that they will achieve their retirement income goals. Assets are invested in specially engineered fixed income and equity mutual funds managed by Dimensional Fund Advisors.
We build individualized portfolios for all participants to maximize the likelihood that they will achieve their retirement income goals. Assets are invested in specially engineered fixed income and equity mutual funds managed by Dimensional Fund Advisors.
Can plan sponsors substitute other investment vehicles for those provided by Dimensional?
No. Dimensional Managed DC's dynamic investment process finds the optimal asset allocation to maximize the probability of achieving individual participants' retirement income goals and manage the risk of not realizing them. The investment vehicles included in the Managed DC system are designed to precisely support this process. Other investments would not provide the transparency and degree of precision the solution requires.
No. Dimensional Managed DC's dynamic investment process finds the optimal asset allocation to maximize the probability of achieving individual participants' retirement income goals and manage the risk of not realizing them. The investment vehicles included in the Managed DC system are designed to precisely support this process. Other investments would not provide the transparency and degree of precision the solution requires.
Is the effectiveness of the Dimensional Managed DC solution dependent on its ability to project future changes in interest rates, inflation, and equity returns?
Not at all. Managed DC invests a significant portion of a participant's savings in fixed income instruments that mitigate interest rate and inflation risk, regardless of how interest rates and inflation actually perform.
Not at all. Managed DC invests a significant portion of a participant's savings in fixed income instruments that mitigate interest rate and inflation risk, regardless of how interest rates and inflation actually perform.
Do participants have to buy an annuity at retirement?
Regulations in different countries specify the amount of flexibility participants have with regard to their retirement savings. Most participants will convert their account balances to vehicles that will provide them with an inflation-protected stream of income for life. Inflation-indexed annuities typically offer the most efficient way to achieve this objective. However, participants may also consider other options.
Regulations in different countries specify the amount of flexibility participants have with regard to their retirement savings. Most participants will convert their account balances to vehicles that will provide them with an inflation-protected stream of income for life. Inflation-indexed annuities typically offer the most efficient way to achieve this objective. However, participants may also consider other options.
How is Dimensional Managed DC different from target date funds?
The end goal of target date funds is to deliver a lump sum payout to investors at their retirement date. The savings of all investors who will retire in the same year are managed in one fund.
Conversely, the end goal of Dimensional Managed DC is to provide retirement plan participants with a targeted level of retirement income that is protected against inflation and will last through the end of their lives. It creates a customized, risk-managed investment plan for each participant.
The end goal of target date funds is to deliver a lump sum payout to investors at their retirement date. The savings of all investors who will retire in the same year are managed in one fund.
Conversely, the end goal of Dimensional Managed DC is to provide retirement plan participants with a targeted level of retirement income that is protected against inflation and will last through the end of their lives. It creates a customized, risk-managed investment plan for each participant.
Does Dimensional Managed DC offer a guarantee that each participant's minimum income goal will be met?
No. Results will depend on a number of factors, including the amount of savings contributed to the plan and changes in interest rates over time.
No. Results will depend on a number of factors, including the amount of savings contributed to the plan and changes in interest rates over time.