Submitted and written by Paul Fokken
Take a look at your 401(k) statement. If you see something like 2035 or 2040, it is typically a glide path/target date fund you ended up being in enrolled in your company. Target date funds are where you get enrolled in a simple process. The company’s financial representative typically will put you in a target fund based around your projected retirement date. I’ve had the chance to review quite a few of company audits and it amazes me what percentage of the investments are in these types of funds. Could there be some self-dealing going on or potential conflicts of interest? As more opinions come out, the dangers of target date funds are illustrating the potential negatives of target date funds.1) So look at your statements and determine whether you, your wife’s or someone you care about has a 401(k) and is put into something on the statement that looks like a 2035T or 2030T fund.
Target Date Funds have grown wildly popular since they were introduced in 1994. Estimates believe that these funds have attracted more than $1 trillion. On the surface, target date funds take the pain out of how to choose the right investments for investors. Investors may simply choose a single target date fund, set it and forget it. But is that really a good thing?
Have target date funds pacified investors into not asking the important questions about their investments and their investment path? Target date funds lump all individuals who are “targeted” to retire on a set date, into the same allocations. There is no regard for a person’s individual situation like the person’s current financial status, the age a person started saving for retirement, an individual’s ability to save, past investment performance or individual risk tolerance.
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1)MarketWatch.com Author – Paul Merriman October 10, 2018 Opinion: 5 Ways Target-Date Funds Let Investors Down