As the $144.5 billion playing field for target-date, or lifecycle, funds continues to get more and more crowded-last year fund companies introduced 302 target-date funds and assets soared 61%-the funds are diversifying their holdings to distinguish themselves. Others are extending their equity exposure with the goal of equipping longer-living retirees with enough money to last throughout their lifetimes.

But is this diversification and high equity exposure making these funds far too risky and could they end up failing investors miserably? Although target-date funds have been available since 1993, they didn't start to flood the market until the past few years. Thus, the industry has yet to see how these funds will fare in a prolonged bear market or how well they will actually serve retirees.

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