Target-date funds

Ideally, most of your retirement income would come from investment returns earned over time, rather than from money you contributed to the plan. Remember: preparing for retirement is a marathon, not a sprint.

Low fees are critical. Each dollar you pay in investment management fees means lower returns — and less money to live on in retirement. Over a 40-year period, a two per cent fee — typical in Canadian retail investing — can consume more than half of a person’s investment returns.^[1]

Within the Advantages Retirement Plan™, OMA Insurance is committed to the philosophy of keeping fees lower while growing your retirement income over time. That’s why the plan is offering target-date funds.

What are target-date funds?

Target-date investment funds take the guesswork out of investing for retirement. They’re tailor-made for retirement and work by allocating your money into a mix of stocks and bonds that changes as you get closer to retirement. When we’re young, we have years ahead of us and may be willing to take more risk as we endure the typical ups and downs of the market. But as we get older, we may look to start reining in the risk to help protect our savings. Target-date funds can help you do just that.

The tenured and experienced Directors of the OMA Insurance board have selected BlackRock’s LifePath target-date funds for several reasons, including reducing the complexity and stress of managing your own savings and providing fees that are lower than the average Canadian retail asset manager.

Founded in 1988, BlackRock is the world’s largest asset manager, with more than US$10 trillion in assets under management, including managing more than $275 billion in assets for Canadian clients. The firm pioneered target-date funds in 1993 with the launch of LifePath Funds. BlackRock is the market leader in Canada for target-date funds, with more than $30 billion in assets in its LifePath products, which have been serving Canadian investors since 2007. LifePath is used as the default investment option in some of Canada’s largest defined contribution plans.

BlackRock’s offering

In the Advantages Retirement Plan™, you can choose from BlackRock’s suite of target-date fund options to simplify and automate your savings for retirement — providing an easy-to-use solution to help keep track of your retirement savings.

BlackRock LifePath target-date funds offer you:

• Professionally managed, diversified investment portfolios to help capture potential market growth throughout your career and into retirement
• A mix of investments that changes as retirement approaches to ensure that you remain appropriately invested

Based on information you provide, the online platform will direct you to a default BlackRock LifePath target-date fund option. If you don’t want the default option, you can choose from eight other LifePath target-date funds.

BlackRock has created a new version of its LifePath target-date funds for the Advantages Retirement Plan™ and other plan sponsors that offer group defined contribution retirement arrangements through a non-insurance platform. The new LifePath target-date funds offered through the Advantages Retirement Plan™ will include very similar, but not identical, investment holdings and adopt asset allocation methodology that is used by BlackRock for its existing LifePath target-date funds. Because the BlackRock funds offered under the Advantages Retirement Plan™ are new, they do not currently have a performance history. Performance history for the new LifePath target-date funds will be available on the fund fact sheets (available during the enrolment process and on the plan’s online dashboard) in the future.

You can always log in to the plan’s online platform to check on your savings. Remember, with the Advantages Retirement Plan™, the goal of the plan is to save for the long term by growing your retirement income.

^[1] Financial author Larry Bates calculates an investor paying a fee of two per cent would only get to “keep” 41 per cent of investment returns earned over a 40-year period. See Larry Bates, Beat the Bank: The Canadian Guide to Simply Successful Investing (2018), p. 45.