{"id":10525,"date":"2023-08-09T16:19:23","date_gmt":"2023-08-09T16:19:23","guid":{"rendered":"https:\/\/isafespend.com\/investing\/target-date-funds-are-they-right-for-you\/"},"modified":"2023-08-09T16:19:23","modified_gmt":"2023-08-09T16:19:23","slug":"target-date-funds-are-they-right-for-you","status":"publish","type":"post","link":"https:\/\/isafespend.com\/?p=10525","title":{"rendered":"Target-Date Funds: Are They Right For You?"},"content":{"rendered":"
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Whether you’ve been introduced to what a target-date fund is or not, you should know that over the last 20 years they’ve become a pretty big deal in the retirement world. If you are saving for retirement either through your employer-sponsored plan or on your own, target-date funds can be a key investment vehicle and have become an important component shaping the retirement landscape.\u00a0<\/span><\/p>\n

<\/span>Simply put, target-date funds, or TDFs, are a \u201cdo-it-for-me\u201d investment strategy consisting of several mutual funds whose asset allocation, or a mix of stocks, bonds, and cash, automatically rebalances to match your time horizon. This means that the TDF, generally, becomes more conservative as the investor nears retirement. The industry term for this process is called the “glide path.” What you’ll hear quite often if you read anything about TDFs is that they are the “set it and forget” method of retirement investing. You pick an option based on your current age (let\u2019s say 35) and predicated retirement age, usually indicated by the names of these funds i.e. BlackRock LifePath 2050, with the number indicating the year that you are targeting for retirement. These \u201cglide paths\u201d can work in many ways; for the most part, the fund will invest heavily in stocks at the outset (the further you are from your \u201ctarget date\u201d) and gradually move towards a more conservative allocation the closer you get retirement (the \u201ctarget-date\u201d). \u201cTarget-date funds have become a popular investment vehicle for retirement plan investors and a core piece of an organization\u2019s investment menu,\u201d says our Lead Advisor, says\u00a0\u201cAs companies have shifted more responsibility towards their employees when it comes to investing and saving for retirement, we have seen a significant increase in TDFs by employees due to their ease of use; as well as employers selecting these strategies as their default option, or QDIA.\u201d<\/span><\/p>\n

Sounds easy right? Almost too good to be true? For as much good as TDF’s have contributed to the industry, there is always another side to the story. The popularity of these retirement plan products doesn’t seem to be slowing any time soon so it’s important to be educated in the details of how these strategies work. Let’s explore a few positives and negatives that come with investing your retirement savings into target-date funds.\u00a0<\/span><\/p>\n

The Pros<\/strong><\/span><\/p>\n