Target Date Funds

Inside a retirement plan we typically find that there are two different types of investors.

We have the do-it-myself investor who understands the market and knows how to pick and choose investments.

And we have the do-it-for-me investor.

Target Date Funds (TDFs) are for the do-it-for-me investor.

Here is how they work.

In the name of the TDF there is a date associated with each fund, a 2015 funds, 2020 fund, 2025 and so forth.

You pick the date that is closest to the date you plan to retire and the money is managed for you towards that date.

For example, if you are 20 years away from retirement you would pick the 2040 TDF.

Since you are 20 years away from retirement, this fund would be moderately aggressive and would become more and more conservative for you automatically as you get closer to the target date.

How that works is they change the allocation of stocks vs bonds. For a better understanding of stocks and bonds you can watch my previous video explaining the difference.

But typically the more stocks in a portfolio the more aggressive, the more bonds in a portfolio the more conservative it is.

So over time as you get closer to retirement the fund changes its allocations to go more bonds and less stocks giving you less risk as you get closer to your retirement target date.

If you would like to talk more about your investments or you need my help then click on the button above and let's schedule a time to have a conversation today!