Saving for retirement is never easy, but target-date funds can eliminate the guesswork in choosing your 401(k) plan investments. In fact, target-date funds are probably the best investment choice for most savers. They offer one-stop shopping and set-it-and-forget-it investing — just what most people should be looking for. Use them properly, and your nest egg will probably grow larger than if you tried to assemble your own diversified portfolio.
Key Takeaways:
- That means using them by themselves and not diluting their benefit by using them in addition to other investments, unless you know what you’re doing.
- They do that because they think cash and bonds are safer. What they are is less volatile in the short run.
- So plan participants who hold company stock as well as target date funds in their retirement accounts have done a little better than people in their same age cohorts who held just target date funds.
“Fewer than half — 49.7% — of workers who kick in money to 401(k)-type accounts use nothing but TDFs. If they’re young and using, say, all-stock mutual funds in addition, there should be little if any risk to their ability to make their balance grow as much as possible by retirement.”
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