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I would go beyond that and say that the average person should use those retirement date targeted funds. Those are usually cheap and minimize risk towards your

I would go beyond that and say that the average person should use those retirement date targeted funds. Those are usually cheap and minimize risk towards your retirement date.

Bedon292 8y ago
While that is what I have mostly done, the retirement date funds I have had access to tend to have significantly hire fees (sometimes close to double) compared to the index funds. Not sure their performance actually justifies it either.
- toomuchtodo 8y ago
  Is this through a 401k or through individual IRA/investments accounts? If the latter, I'd suggest moving to a provider such as Vanguard, with very low expense ratios [1]. If through your 401k, I would suggest encouraging your employer to seek out options where you're not overcharged (preferably as a group of employees, as there is strength in numbers). Failing that, max out your 401k with just enough funds to obtain the full employer match, then fill your IRA(s), and then your taxable accounts. [1] https://investor.vanguard.com/mutual-funds/profile/VTIVX https://investor.vanguard.com/mutual-funds/profile/VTIVX (example fund, Vanguard Target Date 2045 fund, 0.15% expense ratio)
  - Bedon292 8y ago
    Employer 401k, I think my current one is 0.39% for target 2055. I hate it, but doesn't seem to be interest in changing. I think I will push for it again soon though.
  - berberous 8y ago
    Even the Vanguard retirement funds though have expense rations that are multiples of the underlying funds, assuming you have enough cash to qualify for admiral shares of the underlying funds. But you get automatic rebalancing and lower minimums. 0.15% is low enough though that I don't personally worry about the difference that I'm not saving by switching to manually investing in the underlying funds.
pmart123 8y ago
There can be several large issues with target date funds. 1. Ignores income streams from things like social security, reverse mortgages, held away assets 2. Ignorant to future medical advances that could change life expectancy 3. Built on past assumptions of bond yields and interest rate levels 4. higher fees than an equity ETF 5. large discrepancies between each one 6. Bonds are not necessarily less risky than stocks. As yields drop, bond convexity is high, meaning the bond price will be very sensitive to interest rate changes
- chkdsk 8y ago
  Not sure why you're being downvoted. None of these assertions are wrong. I have many family members who still have big company pensions from back in the day and also own target date funds in their 401ks so combined with social security income they end up being massively over-allocated to bonds (a pension & SS can be treated as bonds).

I would go beyond that and say that the average person should use those retirement date targeted funds. Those are usually cheap and minimize risk towards your retirement date.

Bedon292 8y ago

While that is what I have mostly done, the retirement date funds I have had access to tend to have significantly hire fees (sometimes close to double) compared to the index funds. Not sure their performance actually justifies it either.

toomuchtodo 8y ago
Is this through a 401k or through individual IRA/investments accounts? If the latter, I'd suggest moving to a provider such as Vanguard, with very low expense ratios [1]. If through your 401k, I would suggest encouraging your employer to seek out options where you're not overcharged (preferably as a group of employees, as there is strength in numbers). Failing that, max out your 401k with just enough funds to obtain the full employer match, then fill your IRA(s), and then your taxable accounts. [1] https://investor.vanguard.com/mutual-funds/profile/VTIVX https://investor.vanguard.com/mutual-funds/profile/VTIVX (example fund, Vanguard Target Date 2045 fund, 0.15% expense ratio)
- Bedon292 8y ago
  Employer 401k, I think my current one is 0.39% for target 2055. I hate it, but doesn't seem to be interest in changing. I think I will push for it again soon though.
- berberous 8y ago
  Even the Vanguard retirement funds though have expense rations that are multiples of the underlying funds, assuming you have enough cash to qualify for admiral shares of the underlying funds. But you get automatic rebalancing and lower minimums. 0.15% is low enough though that I don't personally worry about the difference that I'm not saving by switching to manually investing in the underlying funds.

pmart123 8y ago

There can be several large issues with target date funds. 1. Ignores income streams from things like social security, reverse mortgages, held away assets 2. Ignorant to future medical advances that could change life expectancy 3. Built on past assumptions of bond yields and interest rate levels 4. higher fees than an equity ETF 5. large discrepancies between each one 6. Bonds are not necessarily less risky than stocks. As yields drop, bond convexity is high, meaning the bond price will be very sensitive to interest rate changes

chkdsk 8y ago
Not sure why you're being downvoted. None of these assertions are wrong. I have many family members who still have big company pensions from back in the day and also own target date funds in their 401ks so combined with social security income they end up being massively over-allocated to bonds (a pension & SS can be treated as bonds).