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
-
Podcast Episode 405: The Retirement Tax Trap
Prefer to watch? Click here to watch and listen on YouTube. The term “tax trap” comes from the misconception that you’ll need less income in retirement, so you’ll pay lower taxes. This leads ma… -
What Should I Watch Out for When Reviewing My Retirement Tax Return?
Now that tax season is over and your return is filed, you may be wondering what you need to review in preparation for next year, especially if you’re approaching retirement. In this week’s Mone… -
Retiring In Uncertain Times
During times of economic uncertainty, it’s natural to feel overwhelmed. It seems like every day there’s a new update from the markets. But rather than reacting to the noise, focus on why you have … -
How Do Tariffs Affect the Stock Market?
If you’ve been tuned into the news lately, you’ve probably heard a lot about tariffs. The current administration’s latest economic push has introduced a wave of uncertainty in the market. But what… -
How Do I Get Out of Debt Fast?
Most people with debt want to get out of it quickly and efficiently. To do that, you first need a clear understanding of your financial situation. Second, you need a clear, actionable plan. In … -
Why Do I Need to Account for Inflation in Retirement?
Today’s question is: What is inflation and why is it important to account for in my retirement plan? Inflation is the rising cost of goods over time. Meaning, it will cost you more money next year… -
How Does a Tax Return Work?
As tax season concludes, it’s a good time to refresh your tax knowledge. In this week’s Money Wisdom Question Series, Ian Fergusson, RICP® discusses how filing your taxes works and why it’s essen… -
What Is a Fiduciary?
When it comes to managing your money, trust is everything. That’s why today’s question is one of the most common and important ones we receive: What is a fiduciary? In this week’s Money Wisdom … -
Podcast Episode 403: How to Approach Finances in a Second Marriage Later in Life
Getting engaged later in life is an exciting time, but it requires different financial planning conversations. With blended families, different retirement timelines, and evolving goals, couples in… -
Podcast Episode 404: Financial Goals You Shouldn’t Overlook
When it comes to preparing for retirement, most people focus on the obvious goals of saving enough and building an emergency fund. But in this episode of Money Wisdom, Jake Doser, CFP®, CPWA® and …
