Research Summary: Recent Life-Cycle Fund Performance (2024)

Life-cycle fund performance from 2006 through 2012 was similar to overall stock market performance

From January2006 until November2012, a representative life-cycle fund¹ for a worker targeting retirement in 2020 had an average annual return of 4.6percent, compared with 4.2percent for the S&P500.

During the period the stock market experienced the largest losses, bond returns boosted life-cycle fund performance

The U.S. Bond market returned an average annual return of 6percent since January2006; high by recent historical standards. For life-cycle funds, high bond returns mitigated some of the losses that stocks suffered in 2008.

A recovering stock market over the past two years has also contributed to positive life-cycle fund returns, but not at the same rate as the S&P500

The S&P500 averaged an annual return of 16.1percent from January2009 to November2011 compared with 11.7percent for a representative life-cycle fund over the same period.

Life-cycle fund performance since 2006 is substantially better than simulations using historical returns, primarily because of high bond returns.² However, if stock returns continue to surpass bond returns, the advantage of the life-cycle fund relative to the S&P500 may change.

While the life-cycle fund moderated both extreme negative and positive market performance over the selected time period, as always, there is no guarantee that an investor will experience similar results.

NOTES: All content is simplified for presentation. Please see source material for full details and caveats.

The findings and conclusions presented in this summary are those of the authors and do not necessarily represent the views of the agency.