Retirement Planning / Anything Wrong With Target Retirement Funds
May 29, 2022
Anything Wrong With Target Retirement Funds
It seems like the right fund to choose for my retirement account. But what am I missing? What are some reasons why people don't go with these funds? Thank you.
Replies (5)
May 31, 2022
@JasieL9A, I wouldn't say there's something wrong with them but a matter of personal preference and choice. I know many who invest in them because they are simple and the asset allocation is basically set for you for life. If you are not someone who is interested in managing your own investments within your retirement accounts or even have the desire to do this on your own, target date retirement funds make a whole lot of sense. The other reason is that these funds also are more conservative usually because of it's bond allocations. Some people with more than 10 or 20 years left to retirement choose to invest 100% of their contributions into equity funds. Really comes down to personal preference.
Jun 04, 2022
@XavierWD4, Thanks this is great.
May 31, 2022
@JasieL9A, There's nothing wrong with them. Just like there are thousands of funds to choose from, this is just another variety (that's how I see them). If you're hands-off and don't know how you would even start building your own portfolio, this is a great choice. Set it and forget it.
Jun 11, 2022
@JasieL9A, Another aspect, aside from them generally being more conservative because they typically allocate to bonds, is that if you hold them in a taxable account, you might get hit with a surprise tax bill because of the regular buying and selling done within the fund. The Gist team here at Finny address this in one of their bites - you can read that here: The Problem With Holding Target Date Funds In Taxable Accounts. Hope that helps!
Jun 17, 2022
@Jess225, that's a good one and thanks for the read 👍