Defined contribution (DC) plan participants are gravitating toward simpler investment strategies, according to a recent Vanguard analysis of plan lineups and participant behavior. In 2025, 66% of participants held just one investment fund, and 61% invested solely in a target date fund (TDF), up from 46% in 2016. Participants held an average of 2.2 investment options in 2025, down from 2.7 in 2016.
The shift was especially pronounced among younger workers. Approximately 80% of participants younger than 35 held a single fund. Vanguard attributed much of the growth in TDF use to automatic enrollment, since TDFs are commonly the qualified default investment alternative (QDIA) in plans that enroll employees automatically. The firm also noted that 94% of employees participate in their workplace plan when automatic enrollment is offered.
Why It Matters
Taken together, the findings show that plan design, not participant selection, increasingly shapes how retirement assets are invested. For many employees, the default fund is the investment strategy, and automatic enrollment paired with a TDF can be a powerful combination for encouraging participation while reducing the number of decisions participants must make.
That makes clear communication important. Participant education can help employees understand how a TDF is designed to function as a standalone investment, how its allocation adjusts over time, and what the year in its name represents. Sponsors may also want to review with their advisor how the plan’s default investment is described in enrollment and ongoing communications.
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