For a new graduate enrolling in a 401(k), what is the most likely default investment option?

The most likely default investment option for a new graduate enrolling in a 401(k) is typically a lifecycle allocation fund, especially one that is aligned with the retirement timeline of the participant. A 2060 Lifecycle Allocation fund is designed for individuals who plan to retire around the year 2060, which corresponds to younger employees and their investment horizon.

Lifecycle funds, also known as target-date funds, automatically adjust the asset allocation from higher-risk investments, such as stocks, to lower-risk investments, such as bonds, as the target retirement date approaches. This feature of gradual risk reduction makes them an attractive default option for new graduates who may not yet have the knowledge or experience to choose their investments strategically. Additionally, these funds are designed to be a "set it and forget it" option, catering to individuals who prefer a hands-off approach to their retirement savings.

In contrast, a standard mutual fund might not provide the same level of lifecycle management and risk adjustment. An aggressive growth fund could pose too much risk for a new graduate who may not be ready to endure significant volatility in their investment. Lastly, a 2020 Lifecycle Allocation fund would be more suited to someone nearing retirement rather than a recent graduate, making that option less relevant for someone just starting their