If you were auto-enrolled in a 401(k), your contributions may go into a qualified default investment alternative (QDIA). This article explains what a QDIA is, how your contributions are invested when you have not chosen a portfolio, and how to change your investment choice.
We place your contributions into a qualified default investment alternative (QDIA) if you’re enrolled in a 401(k) plan but have not chosen a portfolio yet. This usually happens after automatic enrollment, which occurs if you do not manually enroll or opt out before your enrollment deadline.
A QDIA is the default investment portfolio for your 401(k) assets. It’s based on factors like your age and estimated retirement date.
As the designated investment manager and plan fiduciary for 401(k) plans, Gusto Investment Services follows Department of Labor (DOL) guidance and created QDIAs with a mix of investments that take your age and an assumed retirement date into account.¹
Gusto Investment Services offers six managed portfolios. Your QDIA is based on the portfolio that best aligns with your age and estimated time to retirement.
Note: If you have not given us your estimated retirement age, our system defaults to age 63.
As you get closer to retirement—if you still have not made your own investment selection—your QDIA gradually shifts from a more aggressive mix of investments to a more conservative one. This shift follows a built-in glide path, a formula that defines the asset allocation mix in your QDIA based on your estimated time to retirement. Your assets automatically reinvest in line with this glide path, as illustrated below.
Years until retirement
QDIA model portfolio
28 or more years
Very aggressive—95% stocks, 5% bonds
23 – 27 years
Aggressive—85% stocks, 15% bonds
18 – 22 years
Moderately aggressive—75% stocks, 25% bonds
8 – 17 years
Moderate—65% stocks, 35% bonds
3 – 7 years
Moderately conservative—55% stocks, 45% bonds
Less than 3 years
Conservative—45% stocks, 55% bonds
The glide path uses these assumptions to determine your model portfolio.
Default retirement age of 63
Years until retirement = default retirement age minus your current age
As you age and move into the next bracket, your assets automatically reinvest in the next model portfolio shown above.
You can change your investment portfolio at any time through the Portfolio page of your Gusto Retirement dashboard. Learn how to update your portfolio.
Important: Once you make an investment selection, your investments no longer default or automatically reinvest based on the glide path—even if you stay in the same model portfolio you were invested in under the QDIA.
Investment advisory services for Gusto’s 401(k) (when 3(38) fiduciary services are appointed) and SEP IRA/IRA products are offered by Gusto Investment Services, LLC, an SEC-registered investment adviser. References to “Gusto,” “we,” or “our” in this article specifically refer to Gusto Investment Services, LLC. For more information regarding fees and services, see Gusto’s ADV 2A Brochure and Form CRS. ¹ This information is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal, and/or financial advice that considers all relevant facts and circumstances. You are advised to consult a qualified financial adviser or tax professional before relying on the information provided herein. Investing involves risk, and investments may lose value.