Those "target-date" retirement funds that millions of people use are actually a pretty raw deal for low-income workers.
SSRN · March 18, 2026 · 6425038
The Takeaway
Target-date funds assume all young workers can handle high stock market risk. However, low-income workers often have jobs that are highly correlated with the stock market, meaning they are 'doubling down' on risk just when they are most vulnerable to a crash.
From the abstract
Target date funds – which initially invest a large share of retirement savings in stocks and shift gradually towards bonds over the life cycle – are designed to provide a “one stop shop” for retirement investing. The rationale for this pattern is that human capital, which is highest at the start of a worker’s career, is “bond-like.” Thus, utility is maximized when financial wealth is initially invested primarily in stocks, with the investment mix shifting towards bonds as the present value of fu