What to Do (and Not Do) With a Target-Date Fund After Retiring
Target-date funds are a staple of employer-sponsored retirement funds, due in part to their ease of use. The funds adjust allocations over decades, starting with big equity exposures, then glide gradually into more fixed income.
But some investors don’t stick with them, particularly after they retire. Thinking they can do a better job of managing their money than a target-date funds’ manager, some investors shift the money into individual retirement accounts where they invest in other types of funds.
Is that the right move? Here are six things to consider before quitting a target-date fund:
Upsides to leaving
1. Target-date funds are short on customization
While one of the marketing points of target-date funds is that the funds are supposedly designed for the expected retirement year, the actual target dates typically are five years apart. That means investors usually end up choosing a fund with the date closest to the year in which they plan to leave full-time work. But retirement dates can change. The dates chosen can be off by years—as can someone’s preferred risk level.
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