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The other thing about TDFs is this........if you plan to retire at age 65 and that coincides with a Fidelity 2050 Target Date Fund, that fund will eventually become almost all fixed income. Just think about the potential returns with a high balance you are likely going to miss out on with 95% fixed income in those final few years. Also, you'll want to keep investing in equities beyond retirement so you're going to need to re-balance your portfolio at some point. You could very well live another 20 to 30 years after age 65 and I sure wouldn't want to be in T-Bills for 30 years earning next to nothing (or even losing money when factoring in inflation).
Not true ..the fidelity 2020 fund which already reached its target is still 52% equities.
For many they may still be more aggressive then they want in retirement . So I am not sure where you are getting this 95% fixed income from.
If anything the funds have been criticized for still being to aggressive in to retirement and beyond
The TDF funds for the firm I work for do indeed glide well below 10% equities at their target date. Even if I was +10 years out from retirement, I wouldn't want to be that heavy into fixed income.
Not true ..the fidelity 2020 fund which already reached its target is still 52% equities.
Quote:
Originally Posted by Florida2014
The TDF funds for the firm I work for do indeed glide well below 10% equities at their target date.
And that's another issue with Target Date Funds: each fund is different. They have different final stock:bond ratios, and different glide paths to get there. Unless you do some research, you are buying a pig in a poke - and if you ARE willing to do that research, then you might as well just set up your own portfolio and save some money.
But I won't knock them completely because some people just don't want to do any research, and for those folks Target Date Funds can work out fine IF they stay consistently invested through the market's ups and downs. (And that is a problem every investment portfolio faces, as no one truly knows their risk tolerance until they have experienced a bad bull market personally. For some people even 10% stocks and 90% bonds is STILL too much risk.)
The TDF funds for the firm I work for do indeed glide well below 10% equities at their target date. Even if I was +10 years out from retirement, I wouldn't want to be that heavy into fixed income.
No major fund families I know of have a glide path that low unless the fund specifically is a type that converts to fixed income but as a general rule most do not do that.
Vanguard's Target Date Funds are based on Jack Bogle's four fund strategy. They have a low expense ratio. I think they work rather well for many investors. The investor should choose the fund which best aligns with their risk tolerance and glide path.
EX: Vanguard Target Retirement 2040
Vanguard Total Stock Market Index Fund Investor Shares 48.20%
Vanguard Total International Stock Index Fund Investor Shares 32.70%
Vanguard Total Bond Market II Index Fund Investor Shares†13.10%
Vanguard Total International Bond Index Fund Investor Shares 1 6.00%
Vanguard Total International Bond II Index Fund 0%
No major fund families I know of have a glide path that low unless the fund specifically is a type that converts to fixed income but as a general rule most do not do that.
What fund is it ?
I’m curious as well. Well below 10% is insufficient in most scenarios IMO
When I was on the 401k committee at work we saw loads of youngins bail in 2008 because those target funds were far more aggressive then they had pucker factor …
They did not come back for years and missed great gains
Yes, I know. You always say that.
Research from Morningstar shows that, in aggregate, the gap between published returns and actual investor returns is best with Target Date funds, followed by balanced funds.
Many just don’t pay attention or even know what they bought so they just let it sit regardless of what they own.it has nothing to do with the type of fund as much as the lack of interest in following things .
Target fund holders tend to be in that camp or they wouldn’t be target fund holders
Usually there is a correlation to interest and bad behaviors..
Last edited by mathjak107; 10-29-2021 at 03:08 AM..
American 401k plans are a sham. People have 1,001 questions on how to make it better - You can't. It is but ONE instrument out of many. You have less than 4% match it's not worth it. Your active fund fee is too high? Not worth it.
Have the 401k fund basically as a high interest "tax free" savings account, make the real money in the taxable brokerage account. A lot of those instruments, even the IRA and ROTH due to all these limitations for the Average Joe are practically worthless in and of themselves, particularly if you have limitations on fund selection by the employer.
If you have S-Corps, business partnerships and can self-administer your own IRA as an employer you can match yourself. But you'll need an actual side business with revenue and pay administrative costs, but that is tax deductible expense under the corp. Incorporate yourself, legitimize your side hustle and buy some property under the Corp, that is when these instruments really start to benefit you.
America treats Corporations better than people. Incorporate your life.
American 401k plans are a sham. People have 1,001 questions on how to make it better - You can't. It is but ONE instrument out of many. You have less than 4% match it's not worth it. Your active fund fee is too high? Not worth it.
Have the 401k fund basically as a high interest "tax free" savings account, make the real money in the taxable brokerage account. A lot of those instruments, even the IRA and ROTH due to all these limitations for the Average Joe are practically worthless in and of themselves, particularly if you have limitations on fund selection by the employer.
If you have S-Corps, business partnerships and can self-administer your own IRA as an employer you can match yourself. But you'll need an actual side business with revenue and pay administrative costs, but that is tax deductible expense under the corp. Incorporate yourself, legitimize your side hustle and buy some property under the Corp, that is when these instruments really start to benefit you.
America treats Corporations better than people. Incorporate your life.
wrong again as a general statement . many 401k plans have lower fees then one can get on his own .
we have vanguard institutional shares which are lower in cost then the admiral shares on these funds
most americans only use their 401ks to save and invest so they certainly are not a waste . it is either their 401k or nothing.
you cant make that a general statement about 401ks
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