Retirement Readiness Income as the Outcome November 18, 2016 - - PowerPoint PPT Presentation

Retirement Readiness – Income as the Outcome

Ashish Shrestha, Vice President

This information is provided for registered investment advisors and institutional investors and is not intended for public use. Dimensional Fund Advisors is an investment advisor registered with the Securities and Exchange Commission. This information is intended expressly for discussion purposes and should not be misconstrued or otherwise interpreted as legal or tax advice. Please consult with qualified legal or tax professionals regarding your individual circumstances.

November 18, 2016

Agenda

• 1. DC Landscape and Opportunities
• 2. Building a Solution
• 3. Appendix

DC Landscape and Opportunities

Focus Group

3

Data is estimated. Components may not add up to the exact total because of rounding. Sources: Investment Company Institute, Federal Reserve Board, National Association of Government Defined Contribution Administrators, American Council of Life Insurers, and Internal Revenue Service Statistics of Income Division. Numbers may not add due to rounding.

Retirement Assets Total $24.5 Trillion in Q2 2016

US total retirement market in trillions of dollars; end of period, selected periods

4

#34909-0813

2.6 4.7 3.7 5.8 6.8 7.3 7.1 7.3 7.4 7.5 3.0 4.6 3.6 5.3 6.2 6.6 6.5 6.7 6.8 7.0 2.0 2.6 2.0 2.7 2.9 3.0 2.8 2.9 2.8 2.8 3.0 4.3 3.5 4.3 4.9 5.2 5.0 5.1 5.1 5.2 0.9 1.5 1.2 1.7 1.9 1.9 1.9 1.9 2.0 2.0 2000 2007 2008 2012 2013 2014 2015:Q3 2015:Q4 2016:Q1 2016:Q2 IRAs DC Plans Private DB Plans Government Plans Annuity Reserves 11.6 17.7 13.9 19.7 22.7 24.0 23.3 24.1 24.0 24.5

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Source: SPARK 2014 Marketplace Update, Brightwork Partners, LLC.

Opportunities for Advisors

Growth of the RIA as Plan Advisor

• Since 2004, RIAs have grown

from 2% of all active 401(k) advisors to 20%.

• The growth of RIA activity has

been most prevalent in the 401(k) plan market, followed by the 403(b) and 457

• pportunities.

CHANNEL TRENDS IN THE 401(k) MARKET—PRIMARY AFFILIATION

#32681-0413

8% 20% 28% 7% 7% 16% 7% 7% 0% 5% 10% 15% 20% 25% 30%

RIA Wirehouse Insurance Independent Broker- Dealer Financial Planning Co. Regional Broker- Dealer TPA/ Fee-based Benefits Consultant Other

2008 17% 2013 20% 15% 10% 18% 10% 5% 5%

“Memo to Industry: Get Behind Fiduciary Rule” Morningstar, April 17, 2015. “Financial planners foresee little disruption to practices from DOL fiduciary rule” Investment News, April 11, 2016. “Post-DOL fiduciary rule, Schwab dumps load funds as advisers yawn” Investment News, April 28, 2016. “Insurance groups opposed to DOL Fiduciary Rule step up campaign spending” Investment News, May 5, 2016.

Regulatory Reform

6

“Memo to Industry: Get Behind Fiduciary Rule” —Morningstar, April 17, 2015

2006 Pension Protection Act 2012 Fee Disclosure Regulations 2016 DOL releases final Fiduciary Rule

“Memo to Industry: Get Behind Fiduciary Rule” Morningstar, April 17, 2015. “Financial planners foresee little disruption to practices from DOL fiduciary rule” Investment News, April 11, 2016. “Post-DOL fiduciary rule, Schwab dumps load funds as advisers yawn” Investment News, April 28, 2016. “Insurance groups opposed to DOL Fiduciary Rule step up campaign spending” Investment News, May 5, 2016.

Regulatory Reform

7

2006 Pension Protection Act 2012 Fee Disclosure Regulations 2016 DOL releases final Fiduciary Rule

“Post-DOL fiduciary rule, Schwab dumps load funds as advisers yawn” —Investment News, April 28, 2016 “Insurance groups opposed to DOL fiduciary rule step up campaign spending” —Investment News, May 5, 2016

“Memo to Industry: Get Behind Fiduciary Rule” Morningstar, April 17, 2015. “Financial planners foresee little disruption to practices from DOL fiduciary rule” Investment News, April 11, 2016. “Post-DOL fiduciary rule, Schwab dumps load funds as advisers yawn” Investment News, April 28, 2016. “Insurance groups opposed to DOL Fiduciary Rule step up campaign spending” Investment News, May 5, 2016.

Regulatory Reform

8

2006 Pension Protection Act 2012 Fee Disclosure Regulations 2016 DOL releases final Fiduciary Rule

“Financial planners foresee little disruption to practices from DOL fiduciary rule” —Investment News, April 11, 2016

“Facilitating investments in such high-quality, low-fee products would be consistent with the prevailing (though by no means universal) view in the academic literature that posits that the

• ptimal investment strategy is often to buy and hold a diversified portfolio of assets calibrated to

track the overall performance of financial markets,’ according to the proposal.” “Agency wants to offer regulatory ‘safe harbor’ for advisers who sell ‘high-quality, low-fee’ funds”

“In Labor Department’s fiduciary proposal, a nod to passive investing,” Investment News, April 17, 2015.

“In Labor Department’s fiduciary proposal, a nod to passive investing”

Investment News, April 17, 2015

9

FEES FUNDS FIDUCIARY

“In addition to fees, funds and fiduciary, specialist defined-contribution advisers are raising the stakes with conversations around plan health and design. … improving retire retirement readin readiness s and preparing employees for retirement was sponsors’ No. 1 goal, with 35% of Fidelity survey respondents indicating as much. According to a new plan sponsor survey conducted by Fidelity Investments, 17% of sponsors are actively looking to switch advisers, up from 13% last year and 10% the year before.”

http://www.investmentnews.com/article/20151002/FREE/151009984/advisers-must-go-beyond-the-three-fs-to-compete-for-retirement-plan?issuedate=20151015&sid=RPAEMAIL

“Advisers must go beyond the three Fs to compete for retirement-plan business”

Investment News, October 2, 2015

10

Participation rates Deferral rates Account balances – what’s your number? Investments

Defining Retirement Readiness

11

What does retirement readiness really mean?

Why do people save and invest for retirement? To maintain a standard of living in retirement

12

SAVE

“If you don’t know where you’re going, you’ll end up someplace else.” – Yogi Berra

CONSUME INVEST

Focus on Income in Retirement

13

Participant view

Source: Texas Tech Retirement Spending Survey, 2015, sourced from www.onefpa.org/journal/Pages/FEB16-Spending-in-Retirement-Determining-the-Consumption-Gap.aspx.

What is your greatest fear about managing your finances in retirement? How important is knowing what your income will be in retirement? When thinking about retirement income, income certainty is more important than the performance

• f my investment portfolio.

Not knowing how much I can spend safely Not being able to live my desired lifestyle Not leaving a large enough inheritance Dying before I can spend all my savings Very Somewhat Moderately Not very Not at all 76% 24% 63% 23% 13% 1% 40% 43% 11% 5% True False RETIRMENT PLANNING PERSPECTIVES

The Need for Consumption in Retirement

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Industry experts agree that now is the time to focus on retirement income

• 1. Survey funded in part and underwritten by Dimensional Fund Advisors. Used with permission of EBRI.
• 2. Dimensional Fund Advisors LP worked collaboratively with S&P Dow Jones Indices (S&P DJI) to develop the S&P Shift to Retirement Income and DEcumulation (STRIDE) Index series and receives compensation from S&P DJI in

connection with licensing rights to the same.

• 3. www.dol.gov/ebsa/regs/lifetimeincomecalculator.html.

“88% of plan participants find information regarding how retirement savings can last throughout retirement valuable.”

—2014 EBRI Retirement Confidence Survey1

“S&P DJI believes there is room in the target date industry for a new category, because it is possible to combine a glide path with a risk management framework, where the risk that one seeks to manage is the uncertainty

• f future income.”

—Philip Murphy2 Vice President S&P Dow Jones Indices

“Showing participants their retirement plan account balance as level monthly payments for their lifetime will help them assess their retirement readiness and plan for their retirement.”

—US Department of Labor3

Building a Solution

Risk-Return Tradeoffs

What is the right measure of risk?

Uncertainty about retirement income

What is the right tradeoff?

Retirement income risk management vs.

• pportunity of growing income

If the goal is retirement income…

16

Managing Income Uncertainty Risk

17

Interest rates, inflation, and income

INTEREST RATES

$300,000 $300,000 CD = $3,000 in income per year (a 71% drop in income) = $10,500 in income per year 1.0% 3.5%

INFLATION

$300,000 = $271,719 (a drop of 9% in real value in wealth and income) 2%

5 Years

Notes: Hypothetical scenarios for illustration purposes only. Under the “Interest Rate” chart, interest income is calculated multiplying $300,000 times the interest rate shown. Under the “Inflation” chart, the value of wealth after five years of inflation at an the shown rate is calculated by dividing $300,000 by (1.0x)^5 (e.g., for 2% assumed inflation, dividing $300,000 by (1.02)^5).

= $246,578 (a drop of 18% in real value in wealth and income) 4% Managing income uncertainty risk means protecting savings against changes in interest rates and inflation.

Translating Wealth into Consumption

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Present value calculation assumes a discount rate of 2%. Cost of Income data from S&P Dow Jones Indices. Interest rates represented by the 10-year par yield published by the Federal Reserve System, statistical release H15.

1 1 1 1 1 1 1 2 3  24 25

1.00 .98 .96 .94 .62 .61

Present Value ($): Today Today’s total cost of total cost of $1 $1 retirement cons retirement consumption: ption: $19. $19.52 Retirement Year: Annual Consumption ($): 25 years of Inflation-Adjusted Income Starting at Retirement Planned Consumption:

1.00 .98 .96 .94 .62 .61

Today’s Cost of $1 Future Consumption:

The cost of consumption is derived using real interest rates, and will therefore vary with changes to real interest rates.

• 4%
• 1%

2% 5% $12 $18 $24 2002 2004 2006 2008 2010 2012 2014 Interest Rates Cost of Consumption Cost of Consumption 10 Year Real Interest Rate

Target Retirement Date

Translating Wealth into Estimated Retirement Consumption: Accumulated Balance ÷ Cost of Consumption = Estimated Annual Consumption $1,000,000 ÷ $19.52 = $51,220 per year for 25 years on an inflation-adjusted basis

For illustrative purposes only. Not guaranteed. Based upon the market observations of Dimensional Fund Advisors LP.

• 1. Refers to a liability-driven investment (LDI) strategy. See "Disclosures and Risks" for more information.

Making the Risk-Return Tradeoff

Contributions invested in income-growth assets—a diversified portfolio of global equities and fixed income Any increase in value of income-growth assets can be invested toward more income slices1 later in your career Investment focus shifts from income growth to income risk management, with more portfolio assets invested in inflation-protected securities As you begin spending income, the portfolio is invested in assets designed to reduce income uncertainty

Early Years Later Years Approaching Retirement In Retirement

Income Year 1 Income Year 2 Income Year 3

Retirement Date

Income Year 1 Income Year 2 Income Year 3

Retirement Date

Income Year 1 Income Year 2 Income Year 3

Retirement Date

Income Year 1 Income Year 2 Income Year 3

Retirement Date

Income Growth Income Risk Management

19

Glide path based on expectation of the Dimensional Target Date Retirement Income Funds' asset allocation changes over time. The actual asset allocations utilized by each fund may deviate from the allocations illustrated by this glide

• path. See "Disclosures and Risks" for more information.
• 1. Refers to Liability Driven Investment strategy. A Liability Driven Investment (LDI) strategy is designed to focus on assets that match future liabilities. LDI strategies contain certain risks that prospective investors should evaluate and

understand prior to making a decision to invest. These risks may include, but are not limited to, interest rate risk, counterparty risk, liquidity risk and leverage risk. Inflation protected securities may react differenty from other debt securties to changes in interest rates. There is no guarantee strategies will be successful. For illustrative purposes only.

Income Growth vs. Income Risk Management

20 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 40 38 36 34 32 30 28 26 24 22 20 18 16 14 12 10 08 06 04 02 02 04 06 08 10 12 14 Percentage of Assets Global Equities Global & Credit Fixed Income Inflation Protected & Ultra Short Fixed Income

Retirement Date

Increasing Allocation to Income Risk-Hedging Assets

Years Before Retirement Years In Retirement

Global Equities and Fixed Income Inflation-Protected LDI Strategy1

Allocations and holdings are subject to change. Please see the prospectus for more information on target ranges for allocations to underlying equity and fixed income funds.

Eligible Underlying Strategies

21

Fund Name Ticker US Equities US Large Company DFUSX US Core Equity 1 DFEOX Non US Equities Large Cap International DFALX International Core Equity DFIEX Emerging Markets Core Equity DFCEX Global Bonds Short-Term Extended Quality DFEQX Two-Year Global Fixed Income DFGFX Inflation Protected LDI LTIP DRXIX Inflation-Protected Securities DIPSX One-Year Fixed Income DFIHX

More Fewer Years to Retirement

Target Global Equity Allocation Dynamic rebalancing to maintain a liability duration matched portfolio. Core equity technology creates efficiencies and exposure to dimensions of expected returns. Global exposure to fixed income dimensions

• f expected return: variable term and credit.

Exposure to: Over 43 countries Over 12,000 securities

For illustrative purposes only. Estimated units of income and income-hedging assets refers to investment in LDI strategy.

What about Rebalancing?

Risk Management: Asset Allocation Dynamics

Expected “average” contributions should be used to adjust allocation without affecting hedge. Overall income growth/income hedge strategy has two components:

• Expected or target allocation
• Dynamic adjustment to reduce

downside income risk

22

After an equity market decline, cash flows should be used to rebalance gradually, attempting to avoid selling income risk management assets.

Years to Retirement Equity Allocation Target Equity Allocation Quicker rebalance toward target allocation when value of income-growth assets increases

• Increase in value invested in additional income-hedging assets

Dynamic adjustment

• Gradual adjustment toward target
• Seeks to not decrease estimated units of income

A decline in equity values causes allocation to drop below target

For illustrative purposes only. The estimated retirement income projections of the calculator are hypothetical in nature and are not a guarantee of future results. Since past performance is not an accurate predictor of the future and reliance

• n historical and current data involves inherent limitations, it is important to understand that the estimates are only a tool to be used in evaluating your retirement portfolio. Actual results will vary.

Enabling Meaningful Engagement

23

$56,119 $46,240 $42,091 $37,251 $38,240 $37,286 $18,453 $28,975 $31,777 $15,000 $25,000 $35,000 $45,000 $55,000 $65,000 EARLY YEARS APPROACHING RETIREMENT IN RETIREMENT Current Age 35 60 65 Retirement Age 65 65 65 Current Account Balance $80,000 $700,000 $860,000 Current Annual Income $100,000 $100,000 — Monthly Contributions1 12% 12% — Withdrawal Period 25 years 25 years 25 years

My Retirement Income Calculator

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Increasing levels of clarity around how much income your savings may provide in retirement

As of March 31, 2016. For illustrative purposes only. The estimated retirement income projections of the calculator are hypothetical in nature and are not a guarantee of future results. Since past performance is not an accurate predictor of the future and reliance on historical and current data involves inherent limitations, it is important to understand that the estimates are only a tool to be used in evaluating your retirement portfolio. Actual results will vary.

• 1. Includes employee contributions of 8% and employer contributions of 4%.

Estimated Annual Retirement Income: Inputs:

75th percentile 10th percentile Median

Embedding the My Retirement Income Calculator

25

Appendix

Disclosures and Risks

Investments in target date funds are subject to the risks of their underlying funds, and asset allocations are subject to change over time in accordance with each fund's prospectus. An investment in

• r retirement income from a target date portfolio is not

guaranteed at any time, including on or after the target date. An investment in a target date portfolio does not eliminate the need for investors to decide—before investing and periodically thereafter—whether the portfolio fits their financial situation. Target Date Funds are designed to target a year in which an investor may withdraw funds for retirement or other purposes. For more information, please refer to the prospectus. There is no guarantee this investment strategy will be successful, and it is possible to lose money with this investment. Investments in stocks and bonds are subject to risk of economic, political, and issuer-specific events that cause the value of these securities to

• fluctuate. Fixed income securities are subject to increased loss of

principal during periods of rising interest rates and may be subject to various other risks, including changes in credit quality, liquidity, prepayments, and other factors. Inflation-protected securities may react differently from other debt securities to changes in interest rates. A liability-driven investment strategy is designed to focus on assets that match future liabilities. LDI strategies contain certain risks that prospective investors should evaluate and understand prior to making a decision to invest. These risks may include, but are not limited to, interest rate risk, counterparty risk, liquidity risk, and leverage risk. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about the Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors collect at (512) 306-7400 or at us.dimensional.com. Dimensional funds are distributed by DFA Securities LLC. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status, or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation

• r warranty as to the accuracy of the information and neither

Dimensional Fund Advisors LP nor any of its affiliates shall have liability for decisions based on such information.

27

Numbers may not add to 100% due to rounding.

Dimensional Target Date Retirement Income Funds

Asset allocation as of September 30, 20161

28

• 1. Allocations and holdings are subject to change. Please see the prospectus for more information on target ranges for allocations to underlying

equity and fixed income funds.

More Fewer Years to Retirement

Target Retirement Date 2060 2055 2050 2045 2040 2035 2030 2025 2020 2015 2010 2005 Income Global Equity 95.0 95.0 95.0 95.0 87.6 74.2 60.5 47.0 33.6 24.9 24.9 23.2 20.0 US Equities 58.4 58.3 58.4 58.3 53.8 45.6 37.2 29.0 20.7 15.3 15.3 14.2 12.3 International Equities 28.3 28.4 28.3 28.3 26.1 22.1 18.0 14.0 10.0 7.4 7.4 6.9 6.0 Emerging Markets Equities 8.4 8.4 8.4 8.4 7.7 6.5 5.3 4.1 2.9 2.2 2.2 2.1 1.8 Global Bonds 5.0 5.0 5.0 5.0 12.4 19.3 14.0 8.7 3.4 — — — — Inflation-Protected LDI — — — — — 6.5 25.5 44.3 62.9 75.1 75.2 76.8 80.0 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

1.Target Date Retirement Income Funds were launched on November 2, 2015, therefore the “Other Expenses” and “Acquired Fund Fees and Expenses” components of their expense ratios shown are based on anticipated fees and expenses for the first full fiscal year. The fund prospectus contains more information on fees and expenses.

Dimensional Target Date Retirement Income Funds

29

Name Ticker CUSIP Net Expense Ratio1 Total (Gross) Expense Ratio1 Management Fee

Dimensional Retirement Income Fund TDIFX 23320G190 0.23 0.23 0.03 Dimensional 2005 Target Date Retirement Income Fund DRIMX 23320G182 0.21 0.21 0.03 Dimensional 2010 Target Date Retirement Income Fund DRIBX 23320G174 0.21 0.21 0.03 Dimensional 2015 Target Date Retirement Income Fund DRIQX 25239Y535 0.21 0.21 0.03 Dimensional 2020 Target Date Retirement Income Fund DRIRX 25239Y527 0.23 0.23 0.03 Dimensional 2025 Target Date Retirement Income Fund DRIUX 25239Y519 0.25 0.25 0.03 Dimensional 2030 Target Date Retirement Income Fund DRIWX 25239Y493 0.27 0.27 0.03 Dimensional 2035 Target Date Retirement Income Fund DRIGX 25239Y485 0.28 0.28 0.03 Dimensional 2040 Target Date Retirement Income Fund DRIHX 25239Y477 0.29 0.29 0.03 Dimensional 2045 Target Date Retirement Income Fund DRIIX 25239Y469 0.29 0.29 0.03 Dimensional 2050 Target Date Retirement Income Fund DRIJX 25239Y451 0.29 0.29 0.03 Dimensional 2055 Target Date Retirement Income Fund DRIKX 25239Y444 0.29 0.29 0.03 Dimensional 2060 Target Date Retirement Income Fund DRILX 25239Y436 0.29 0.29 0.03

Dimensional Target Date Retirement Income Funds

30

Communication Resources

Videos

CLIENT READY Available on Public Site

My Retirement Income Calculator

CLIENT READY Available on Public Site

Brochures

CLIENT READY Available on Public Site PROFESSIONAL USE ONLY Available from your Regional Director

Dimensional Target Date Retirement Income Funds

Additional Information

31

The S&P STRIDE Index series are a multi-asset class solution designed to transition from growth assets to a hedged stream of inflation-adjusted retirement income based on target retirement dates. Dimensional Fund Advisors worked collaboratively with S&P DJI to develop the glide path, inflation hedging, and duration hedging techniques used in these indices. Additional information, including a white paper co-authored by Gerard O’Reilly, PhD and Massi De Santis, PhD available on S&P’s website.

S&P Shift to Retirement Income DEcumulation (STRIDE) Index Series Events: Annual DC Conference

July 27, 2016 Chicago, Illinois

401(k) Workshop

August 24, 2016 New York, New York

Contact your Regional Director for more information.

In-depth discussions on key concepts and applications of the Dimensional Target Date Retirement Income Funds.

PROFESSIONAL USE ONLY Available on Client Site

Quarterly Webinars: Dimensional Target Date Retirement Income Funds

Quarterly Webinars

Q1: Liability-Driven Investing

Marlena Lee, PhD

February 17th

Q2: Benchmarking

Massi De Santis, PhD

May 11th

Q3: Communications

Massi De Santis, PhD

August 17th

Q4: Advanced Uses

Gerard O’Reilly, PhD

December 1st

Communication Tools

32

Brochur chures es Vi Videos Fund Fact Shee Fund Fact Sheets Mailer Mailers Presentations esentations

2030 Target Date Retirement Income Fund

33 Weight (%) Global Equity

60.7

US Equities

37.8

International Equities

17.8

Emerging Markets Equities

5.1

Global Bonds

14.0

Inflation Protected LDI

25.3

Total

100.0 ELIGIBLE UNDERLYING FUNDS Fund Name Ticker US Equities US Large Company DFUSX US Core Equity 1 DFEOX Non US Equities Large Cap International DFALX International Core Equity DFIEX Emerging Markets Core Equity DFCEX Fixed Income DFA Short-Term Extended Quality DFEQX DFA Two-Year Global Fixed Income DFGFX DFA LTIP DRXIX

Asset allocation as of June 30, 20161

• 1. Allocations and holdings are subject to change. Please see the prospectus for more information on target ranges for allocations to underlying

equity and fixed income funds.

Purposeful Asset Allocation Is Critical to Outcomes

Retirement capital sources shift with age

For illustrative purposes only.

PROPORTIONS OF TOTAL RETIREMENT SAVINGS WEALTH: Global Equities Future Savings Global Fixed Income Global Equities Income Risk Management Assets Future Savings

Younger employees (early in savings life) Older employees (late in savings life)

Financial capital Human capital Financial capital Human capital 34

#41128-0814

For illustrative purposes only. Not guaranteed. Based upon the market observations of Dimensional Fund Advisors LP.

• 1. Refers to a liability-driven investment (LDI) strategy. See "Disclosures and Risks" for more information.

Making the Risk-Return Tradeoff

Contributions invested in income-growth assets—a diversified portfolio of global equities and fixed income Any increase in value of income-growth assets can be invested toward more income slices1 later in your career Investment focus shifts from income growth to income risk management, with more portfolio assets invested in inflation-protected securities As you begin spending income, the portfolio is invested in assets designed to reduce income uncertainty

Early Years Later Years Approaching Retirement In Retirement

Income Year 1 Income Year 2 Income Year 3

Retirement Date

Income Year 1 Income Year 2 Income Year 3

Retirement Date

Income Year 1 Income Year 2 Income Year 3

Retirement Date

Income Year 1 Income Year 2 Income Year 3

Retirement Date

Income Growth Income Risk Management

35

Source: Morningstar Universe, composed of 54 fund families (575 funds as of 12/31/2015). Note: fund families may have more than one series.

• 1. Allocations and holdings are subject to change. Please see the prospectus for more information on target ranges for allocations to underlying equity and fixed income funds.
• 2. Glidepath allocations are calculated as the asset-weighted average of all share-classes for funds of each target date.

Equity/Fixed Income Allocation Considerations

COMPARISON OF DIMENSIONAL AND AVERAGE INDUSTRY LIFECYCLE ALLOCATIONS1 OVER TIME 36 0% 20% 40% 60% 80% 100% 40 35 30 25 20 15 10 5

• 5
• 10
• 15

Equity Allocation Years to/in Retirement Dimensional Glidepath Industry Average

Key points:

1. Younger participants have more aggressive equity allocations (taking advantage of higher expected growth assets when young). 2. Interaction of Human and Financial Capital; “Income Slices” are targeted during the accumulation phase. 3. Approaching retirement, equity allocations are more conservative (relative to industry average of 57%), taking into consideration total portfolio risk and the catastrophic effect that unexpected market downturns can have when participants are in later stages of life. – “Throughout” landing point as opposed to a ‘to’ or ‘through’ landing point.

1 2 3

2 1

As of December 31, 2015