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
-
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… -
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… -
What Updates Can We Expect for Social Security in 2025?
A new year means new rules for retirement plans. Let’s start with one of the largest sources of income for millions of retirees: Social Security. What changes can we expect in 2025? Heath Gross… -
Getting It All Together for Retirement
After a long, fulfilling career, the time has come to embrace the next chapter. You may have envisioned the age at which you’d retire since you began working, but it’s important to distinguish bet… -
Key Questions for Planning Your Retirement Income
Replacing your income in retirement is a significant undertaking that raises many important questions and requires careful planning. First and foremost, it’s essential to have a retirement income … -
Health Care Expenses in Retirement
Of all the expenses to expect in retirement, health care often makes up a significant portion of your costs. Monthly premiums, out-of-pocket expenses, and services not covered by Medicare can quic… -
Income Planning 101
You’ve spent the last few decades saving for retirement but are you truly prepared? To help address any concerns or uncertainties you may have, you need an income plan – one that considers every f… -
Frequently Asked Social Security Questions
Almost every American is impacted by Social Security in some way, so it’s no wonder that it’s one of the most frequently asked topics in retirement planning. When and how you start taking benefits… -
Maximizing Your Social Security Income
Social Security can serve as a safety net for many retirees, sometimes acting as a primary source of income. However, the program is highly complex with over 500 ways to claim benefits. Even one o… -
How Much Money Can I Spend in Retirement?
“How much can my spouse and I realistically spend in retirement at age 62 with $1 million saved?” Today’s hypothetical couple is asking the very question that most pre-retirees ponder when gearing…
