What's wrong with Target date retirement funds?

[JEDI]

Saw this blurb:

"The Securities and Exchange Commission recently proposed new rules for target-date funds, those all-in-one funds widely adopted by many retirement savers and widely criticized by many experts. But do the proposed rules go far enough?"


Whats wrong w/Target date funds???

 

[glenn1]

Like many other financial products, nothing is wrong with them presuming you read the prospectus and don't listen unquestioningly to your financial advisor's claims.

http://more.stltoday.com/stltoday/b...07ab7117a08a4d0386257745000483fb?OpenDocument

 

[rocadelpunk]

I have no idea. The one I use from vanguard has very low fees, models the market, and has nearly the exact diversification I would use, except it's all automatic (including my funding of it).

My Roth IRA was doing pretty good (+10&#37 until recently : (. At least I don't have to worry about it for another 40 years .

 

[jteef]

what i don't like about them is that if you know, in advance, what an investor is going to do, you can beat them to the punch and take their money. so the concept of having a regimented investment plan doesn't make sense to me.

 

[dud]

As far as I know nothing is wrong with them. Both my 401K and Roth are 100% invested in them. You just have to understand how the funds you have in the fund is balanced among other investments.

 

[duragezic]

I didn't know there was a real problem with them. I rock one. Vanguard Target Retirement 2045, even though I will probably have to retire at 2050 or later (I'm 25).

I think as the date went up, the aggressiveness went up (more/aggressive stock allocation, less bonds). So mine's like 70/30 with mix of large cap, small cap, foreign, etc stocks, which supposedly may be too aggressive according to the mail I get, but meh, I don't think so.

Dumb thing you shouldn't do:
When I started working two years ago, I got 6% 1:1 matching. But before I started contributing, I thought I had to figure out what funds and stuff to go with, like do background research and whatnot. I was busy from just starting work and moving and whatnot, I put it off almost 6 months. Finally, I do it all online in 10 minutes and it only took like three simple decisions to make (that could be adjusted at any time).

In the mean time, I lost out on like $3000 in free money as well as ~$6000 more into my 401k. Me = FAIL

 

[evident]

nothing wrong w/ them. i'm in vanguard target 2050 and it's kicking butt so far.

 

[Jadow]

too aggressive for people near or in retirement. during the big stock market decline of 2008, funds like the 2010, and 2005 ones still lost 30% in may cases.

 

[esun]

I think the criticism stems from the concept that there is any investment you can just put your money in and ignore until retirement. That is what the target date funds encourage. However, if you don't actively monitor where the money is actually invested, you can end up getting screwed if too much is still in stocks close to retirement and the market tanks.

You need to watch and manage your money. If you put it in a target date fund, that's fine, but you have to watch it just as if it were in a regular mutual fund. You need to know where the money is invested. You should determine your level of risk and invest accordingly, not just assume the target date fund is the best for you.

 

[DaveSimmons]

Nothing is wrong with the Vanguard target funds, but they use only index funds (stock & bond), nothing actively managed.

Apparently too many people did not read the prospectus for their funds and were caught off-guard by how much was in stocks during 2008-2009:
http://www.lifeandhealthinsurancene...roposes-TargetDate-Fund-Disclosure-Rules.aspx

Of course if they just held on to most funds, they'd be fine now. Even better if they kept buying during the lower points. (Buy low you panic-stricken people. I did very well on the S&P 500 shares I bought when the index was down to 800.)

 

[lothar]

too aggressive for people near or in retirement. during the big stock market decline of 2008, funds like the 2010, and 2005 ones still lost 30% in may cases.

Wow. That's some shit performance.

 

[JS80]

Cuz the aren't aggressive enough. Too little risk.

 

[Blackjack200]

too aggressive for people near or in retirement. during the big stock market decline of 2008, funds like the 2010, and 2005 ones still lost 30% in may cases.

Bingo.

http://www.nytimes.com/2009/06/25/your-money/mutual-funds-and-etfs/25target.html?_r=2

I hate target date retirement funds.

Layered fees, conflicts of interest, ambiguous strategy, and who's to say you won't want to use the money before the "target date" for something? I'd love to see stats on what percentage of assets are redeemed from target date funds before the actual target date.