Target Date Funds – These three words form the best option for people trying to save for retirement. Saving for retirement doesn’t always need to involve head-scratching tactics. There are easier yet beneficial options too.
Target Date Funds are the epitome of “set it and forget it rule”. What does it actually mean? In a lay man’s language, it is a mutual fund that automatically rearranges the mixture of assets belonging to a particular investor within a given time frame depending on how the market performs. These funds keep the investments automatically rebalanced and make retirement planning virtually stress-free.
Sandy Francis, co-owner of a Colorado-based Veda Salon & Spa made the most out of this scheme and has been on the profitable side ever since. According to Veda’s retirement advisor, Target Date Funds have kept them from making severe, costly mistakes.
But this “set it forget it” tactic is dynamic. Certain concepts must be paid heed to before involving in the maze of Target Date Funds.
- It Varies From Investment To Investment
The target fund companies have varied fee structures and different glide paths, i.e., the speed at which the fund’s investments becomes more conservative with time. There are low fee structures and high fee structures. When everything else is equal, low fee structures are the best.
- Target Date Funds – Not Everyone’s Cup Of Tea
For tax reasons, Target Date Funds are not the suitable option for people who wants to save both inside and outside of retirement accounts. But wealthy investors mimic the Target Date Funds’ strategy in a smart way. They put low tax stock index funds in their taxable accounts while high tax bonds and REIT’s in their retirement accounts, thus minimizing the tax bill in a savvy way.
According to a 2017 survey, the Target Date Funds concept is held as one of the most popular offerings from big defined contribution plans. It has already taken the retirement planning world by storm, and people are investing more into it. In the meantime, it’s advisable to set up for this strategy and forget about all the retirement worry!