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Retirement Savings Plan Adds New Option: Target Date Funds

6/3/2014

Investing for retirement is about to get easier. On July 1, the Board of Pensions will add Fidelity Freedom® Index Funds - Class W, also known as target date funds, to the investment options in the Retirement Savings Plan of the Presbyterian Church (U.S.A.). The new option allows you to choose one fund that is professionally managed so that the asset mix and diversification adjust from aggressive to conservative over time.

What Are Target Date Funds?

Target date funds are designed to help you manage your savings from today to retirement, no matter how much time or investment knowledge you have. They offer a single fund choice that does the investing “work” for you.

Each target date fund is a mutual fund (professionally managed collection of stocks, bonds, or other assets open to multiple investors). The allocation and mix of investments in the fund depend on its target retirement year, which is also the fund name. For example, Fidelity Freedom® Index 2040 Fund - Class W is designed for someone intending to retire around 2040, with an investment mix appropriate to that time horizon — the number of years between now and retirement.

Generally, a fund with a target date further in the future will focus on growth and invest more aggressively now ― in stocks, for example. Then, as the target year approaches, the investment mix will change to more conservative investments, to preserve account value. The fund will be actively managed and adjusted as it moves closer to the target date by professionals who research, forecast, and use judgment and experience in making investment decisions. Instead of reviewing and adjusting your investment mix each year, you can use target date funds as a simplified approach to investing.

More Information Coming in June

Look for more information about Fidelity Freedom® Index Funds - Class W in your mail in the coming weeks. You’ll also receive an email with an invitation to attend a target date fund webinar at the end of this month. Remember, you can always get free, confidential guidance from a Fidelity Planning & Guidance Consultant. Call 1-800-642-7131 today to schedule an appointment.

Get Started on July 1 

You may add the Fidelity Freedom® Index Funds - Class W to your RSP portfolio anytime on or after July 1. To learn more, log in to NetBenefits at the upper left-hand corner of fidelity.com/atwork, or call Fidelity’s toll-free number 1-800-343-0860 and speak with a representative (mention plan #57887). You can also visit NetBenefits through Benefits Connect. Log on to Benefits Connect from pensions.org, choose Retirement Savings Plan under My Benefits, then View Retirement Savings Plan Account under Service Providers. Descriptions of the updated RSP investment options will be available on NetBenefits or through Fidelity’s toll-free number.

More Good News: Four Investment Options Cost Less

On July 1, four lower-cost funds will replace four existing RSP funds. The new funds will offer the same investment strategies and risks as the existing funds but with lower overall expenses. Because expenses will be lower, each of the new funds is considered to be in a different share class from the fund it replaces. As a result of this change, the fund codes, ticker symbols, and expense ratios will change. Any portion of your RSP account currently invested in these four funds will transfer to the new share classes (new funds) on July 1. The new options follow:

  • Fidelity® Growth Company Fund – Class K
  • Fidelity® Diversified International Fund – Class K
  • T. Rowe Price Equity Income Fund
  • Royce Opportunity Fund Institutional Class

You will receive more information on the new options by mail in June, including how the share class change will be shown in your personal transactions if you invest in any of these options.

What You Need To Do

If you currently are invested in any of the affected funds, your current balance in and future contributions to those funds will move to the new investment options, unless you request an exchange to another RSP fund before 4 p.m. on July 1, 2014. To change your future investment choices, log on to NetBenefits at the upper left-hand corner of fidelity.com/atwork or call 1-800-343-0860 (mention plan #57887).

Expense Ratios.  Fund expenses, also known as expense ratios, are the fees and expenses of the mutual funds you select. These expenses reduce the overall returns of your investments. Fund expenses for the new, lower-cost funds will be less than those of the funds they will replace, so the effect on the value of your investments also will be less. This will not change the $3.75 fee deducted quarterly from your RSP account to offset administrative expenses. The Board continually reviews the RSP investment options to make sure the plan offers the lowest-cost share classes possible.

Next Steps To Consider

Take a fresh look at these new investment fund opportunities and your savings and investment choices.

  • Sign up for the RSP. If you don’t already participate in the RSP, download the Fidelity Investments Enrollment Form for the 403(b)(9) Retirement Savings Plan of the Presbyterian Church (U.S.A.) and the Retirement Savings Plan Salary Deferral Agreement from pensions.org. Complete and sign the forms and give them to your employer to process. Or, you can call the Board of Pensions at 800-773-7752 (800-PRESPLAN) to request the forms.
  • Increase the amount you save in the RSP. Download the Retirement Savings Plan Salary Deferral Agreement from pensions.org. Complete and sign the form, then give it your employer to complete, sign, and send to the Board of Pensions. Or, you can call the Board of Pensions at 800-773-7752 (800-PRESPLAN) to request a form.
  • Get free, confidential guidance. Call 1-800-642-7131 today for an appointment with a Fidelity Planning & Guidance Consultant (mention plan #57887).

Think about choosing a Fidelity Freedom® Index Fund - Class W starting July 1. View a 25-minute webinar Building a Portfolio for Any Weather, visit NetBenefits, or call Fidelity to see if a Fidelity Freedom® Index Fund - Class W might match your investment style. If so, it’s easy to transfer some or all of your account balance using NetBenefits. Remember, no action is required at this time.   

This article is provided by The Board of Pensions of the Presbyterian Church (U.S.A.).  Fidelity Investments is not responsible for its content.