Target-Date Funds Lack Structures for Retiree Withdrawal and Tax Decisions

MarketWatch reporting notes that target-date funds automate equity-bond shifts until the target year but provide no mechanism for sequencing Social Security claims, managing Medicare IRMAA surcharges, or rebalancing across taxable and tax-advantaged accounts. Vanguard and Fidelity prospectuses confirm the funds stop active reallocation at the target date, leaving participants to execute these trades manually or through separate advice layers. Data from the Employee Benefit Research Institute show 62 percent of 401(k) participants remain in target-date funds past retirement, exposing them to unaddressed sequence-of-returns risk without built-in withdrawal protocols. Industry filings with the SEC reveal no requirement for target-date funds to incorporate longevity hedging or tax-lot harvesting rules, creating a structural gap between accumulation and decumulation phases. The Department of Labor's 2023 guidance on participant advice further underscores that plan sponsors bear no fiduciary duty to add post-retirement tools inside the target-date wrapper itself.