Target Date Funds: A Good Dish?

By Rich Topps

The Recipe

Target Date Funds attempt to move the fund’s investments from a more aggressive posture in the earlier years to a more conservative composition as the “target (retirement) date” approaches.  You and everyone else who has invested in that fund are in the same cookie-cutter situation.  Worse, none of you can speak directly with that fund’s manager to indicate how your situations may have changed over time.  The fund assumes that its investors are all in the same boat, but it’s a certainty that you are not.

The Missing Ingredient

What about your own personal tolerance for risk?  Think about it – in the earlier, more aggressive and potentially most volatile years, the fund value could decline substantially for a period of time.  You may be the type of person who will lose substantial amounts of sleep until its value recovers.   In addition, the fund could possibly be entering its more conservative years when a substantial bull market is going on – one that you will have missed out on. What is missing is your personal risk tolerance. Wouldn’t you rather be dealing with an adviser with whom you can discuss your ongoing situation and who can accordingly adjust your investments?  Wouldn’t you rather be dealing with the professionals at Bolmgren RetirePLAN?