Podcast Episode 387: Should Target Date Funds Be in Your Portfolio?
Have your question answered on the Money Wisdom Question Series!
Investors will often use target date funds in a retirement account because they’re easy to use and align with the goal of retiring at a certain time. Is it really that simple or can you find alternatives that will provide better results for what you want to accomplish?
In the latest episode of the Money Wisdom podcast, Jake Doser, CFP®, CPWA® and Nicholas J. Colantuono, CFP® take on another listener’s question about the effectiveness of target date funds for retirement planning. As retirement approaches, many individuals are faced with the decision of whether to invest in these funds or move that money somewhere else.
If you aren’t familiar with target date funds, they are designed to simplify retirement planning by automatically adjusting the asset mix as the target retirement date approaches. While they offer simplicity and ease of use, relying solely on these funds may not be the best approach for everyone. As retirement nears, the focus shifts from maximizing growth to ensuring a stable income and managing distributions effectively. This often requires a more nuanced and sophisticated approach than target date funds can provide.
One of the primary drawbacks of target date funds is their limited scope. These funds typically focus on a mix of stocks and bonds, neglecting other investment opportunities that could enhance a retirement portfolio. Additionally, target date funds make recommendations based solely on the retirement date, without considering other assets or accounts an individual may hold. This narrow focus can lead to missed opportunities and a lack of alignment with overall financial goals.
We often suggest that individuals approaching retirement consider rolling over their 401(k) assets into an IRA. This move can provide greater flexibility, control, and access to a wider range of investment options. By diversifying their investments, individuals can better tailor their portfolios to their specific needs and risk tolerance. We also want to regularly evaluate retirement plans and make adjustments as needed to ensure they remain aligned with personal goals and market conditions.
For those interested in learning more about 401(k) strategies and retirement planning, we strongly suggest picking up the “Ultimate 401(k) Guide” by Eric Hogarth, CFP®. This book offers insights into how 401(k)s work and provides practical advice for optimizing retirement savings and all you have to do is text GUIDE to 800-757-0436.
Whether you’re just starting to think about retirement or are already on the cusp of this new phase of life, this episode of the Money Wisdom podcast is a must-listen. Gain the knowledge and confidence you need to make informed decisions about your financial future and ensure a secure and prosperous retirement.
Here’s what we discuss in this episode:
0:00 – Today’s question
1:23 – Investment goals
2:52 – What target date funds do
5:55 – 401(k) accounts
8:05 – Retirement account types
Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.
Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.
Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.
The guarantees provided by any type of insurance contract are based on the claims-paying ability of the insurance company.
Related Resources
-
Today’s Retirement Reality
Almost one-third of Americans lack confidence that they will have enough income to cover basic monthly expenses throughout retirement. As the economic landscape continues to shift, more individual… -
How to Prepare for Taxes in Retirement
No matter how well you’ve saved for retirement, taxes are an unavoidable part of the process. The good news is that with the proper tax planning, you can minimize this burden and keep more of what… -
What Are Some Unexpected Retirement Expenses to Look Out For?
Today’s question is one we help our clients navigate all the time: What expenses might I be responsible for as I enter retirement? Nicholas J. Colantuono, CFP® joins this week’s Money Wisdom Qu… -
Essential Steps for a Robust Estate Plan
When planning for retirement, one crucial element that often gets overlooked is estate planning. Creating an estate plan can ensure that your assets, legacy, and loved ones are protected. While es… -
How Can I Generate Low-Tax or Tax-Free Retirement Income?
Today’s question is: What steps can I take to generate low-tax or tax-free income in retirement? First and foremost, it’s essential to have a tax plan – one that fits within the context of your… -
Will I Have Enough Income to Retire?
Once you’ve reached the retirement mountaintop, you may be uncertain about how to navigate the descent. Have you saved enough? Will your money last as long as you do? If you’re like most of the pe… -
Identity Theft: What to Do If Your Identity Is Stolen
In the digital age, the threat of identity theft is at an all-time high. Sophisticated cybercrime tactics and schemes have left us more vulnerable to online scams than ever before. So, what can… -
Don’t Let Taxes Derail Your Financial Plan
A retirement plan that doesn’t consider the impact of taxes can only get you so far. Implementing tax-efficient strategies early on is critical to lowering your lifetime tax liability. After all, … -
The Road to Retirement – Don’t Go it Alone
Achieving the retirement you’ve always dreamed of often requires careful planning. While the do-it-yourself approach may be difficult to shake, consider the benefits of seeking professional advice… -
Am I Carrying Too Much Debt in Retirement?
At any stage in life, debt can interfere with your financial goals. But what about when you retire? How much debt is too much? It depends on a variety of factors, including your income relative to…
