Readers of my articles know that I’m missing something in my argument for target date fund (TDF) reform. It’s Kairos (pronounced KY-ros) – my timing is off. The crash that will expose high risk near retirement has not yet happened, but it will. TDFs will lose money someday pursuant to Stein’s Law regarding the soaring stock market: “If something cannot go on forever, it will stop.”
The missing persuasive argument
Here’s what I’ve got going for me so far and what I still need. I’ve got 3 of the 4 pillars of persuasion working for me so far: Credibility (Logos), Emotion (Pathos) and Logic (Ethos). The academic theory that most TDFs say they use backs me up. All I need is the fourth pillar to kick in -- Timing (Kairos). The stock market has been rising for the past 18 years so there has been no risk for a long time, but there will be
I’m waiting for Kairos -- the window of time when conditions are perfect for an action. The stock market will crash. People near retirement in TDFs will lose much of their lifetime savings. There will be another outcry for reform, just as there was following losses of more than 30% in 2008.
It will be worse than 2008
“It’s different this time” is rarely true, but it is true in this situation. There was only $200 Billion in TDFs in 2008; now there’s $5 Trillion – 25 times as much. And 75 million baby boomers were not in the Retirement Risk Zone in 2008, but they are now. Surveys report that baby boomers want to be protected against losses in their TDF, but they are not.
My message will be heard after the harm is done. Stay tuned. The sad news is that it will be too late for baby boomers in TDFs. Reform will be for the future benefit of Generations X and Y participants in TDFs.
‘Massive Underperformance’ Charged in 401(k) Fiduciary Breach Suits
Reform will emerge from participant uproar that leads to class action lawsuits,. just like high fees were the basis for lawsuits. The fact that high fees were common practice did not work as a defense. Similarly, high risk common practice needs to change; lawsuits will make it so.
Harned beneficiaries will get mad, and then they’ll get even.
Conclusion
Even though I’m waiting for Kairos, you should not. Protect yourselves NOW please. Take our entertaining tour of videos and podcasts for guidance. My very talented sister Kathy created these. Enjoy.
"Only a crisis produces real change." — Economist Milton Friedman. When the stock market crashes, Kairos will expose high TDF risk near retirement. Unlike 2008, that fixed nothing, we’ll fix the problem this time with better protection in the future. It’s a shame that it will take a crisis to produce real change.
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