3 Best Target Date Retirement Funds
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- Опубліковано 3 лип 2024
- Target date retirement funds make investing easy. With just one fund you get immediate diversification across U.S. stocks, international stocks and bonds. The best target date funds have low expense ratios and a sound asset allocation strategy.
In this vide we'll look at 3 of the best target date retirement funds. We'll also look at one to avoid and why. Finally, we'll take a look at what's called the glidepath and why target date retirement funds are often not ideal once you reach retirement.
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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
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Thanks Rob!
I have a Vanguard 2060 TDF (ticker: VILVX) in my Roth 401(k). It was the best choice compared to the other options + it has 0.09 ER ratio. However, I prefer constructing my own allocations in my other retirement and investment accounts.
Thank you Rob, I was going to ask you for this type video/information. Good information. And you answered my question about simply moving funds to another target date fund versus keeping funds in a conservative high fixed fund. Happy New Year.
Another hit!
I’m 100% in FDKLX in my Roth IRA. I love the simplicity and the easy diversification.
Thx, Rob
great video --very well explained for a beginner investor
Rob another great video. My wife and I both have Vanguard TDFs in our 401k. They have done well over the years. We are looking to move out of them when we retire at the end of the year due to the asset allocation being to high in bonds. I would prefer a 60/40 mix or even a 50/50.
The M1 retirement date funds are a reasonable approach too. They are the cost of their underlying funds (all low-cost index) and they allow you the extra flexibility of picking a risk profile for the given date. Or, if you prefer, you can just copy their profile and manually run the pie and rebalance based upon your own schedule. That would allow you to alter the asset allocation however you want based upon the rest of your portfolio. I think it is hard to beat the 3-fund and just rebalancing annually though because the simpler your plan, the more likely you are to act on it. The biggest risk factor is your own behavior so whatever lets you set and forget it is probably going to perform the best.
I read that Vanguard is lowering their ER to 0.11% on their TDFs.
I agree about the too conservative allocations that you spoke about. If someone were to ask me for my advice on these TDFs, I would recommend going 10 or so years further out. I don't use them myself, but I keep an eye on my asset allocations.
Another great video Rob, thanks for the time you put into this. Hi Rob, can you provide the link/name to the back testing portfolio analyzer you are using? Have a nice day
A little surprised the Schwab TDF wasn't on here because I thought it's historically had the lowest ER (.08) but I guess most index TDFs are very similar when it comes down to it. I don't like the thought of paying a bit extra to re-balance/allocate something I can do in a few minutes annually, but it probably makes sense for most people because it's set-and-forget!
Are the cited expense ratios the total fee? Or does the target date fund charge a fee, with the fees of the underlying funds added?
Have you looked at the t rowe price retire 2055 tr f?
I’m in retirement and will need to tap into funds in 5 years due to age 72. Are there funds that will continue to invest but send me my required minimum withdrawal? How to best find these?
Thank you Rob. I am currently invested in Three Fund Portfolio but Target Date Funds seems good as well. My Employer offers a Fidelity Freedom TDF, which consists of Active Mutual Funds. I wasn't sure which one would be good in the Future. What's your Opinion about TDF Vs Three Fund Portfolio?
Great question and worth a video. They both can work. TDF gives convenience. 3 fund gives you more choice.
I am surprised these funds don't use more risk parity thinking as they close in on retirement. They get "conservative" but have huge drawdowns and a lot of risk for little return. If you compare the Fidelity Freedom 2020 portfolio backtested compared to a Golden Butterfly for example, the Golden Butterfly had higher returns and lower and shorter drawdowns. When you're far away from retirement the drawdowns don't matter. in retirement, you spelled out a concern about conservativeness. My concern is that they're just not well-designed to maximize safe withdrawal rates.
I am 63...could wait maybe 5 years?? Newbie. Any suggestions? Tks!
What would happen if the market went down 80%
I wish target date funds had a lower exposure to foreign stock...smth closer to 20-25% max
A lot of people wish that. ;)
What confuses me about these target date funds is the ones for 20-40 year olds with bond exposure. I understand that bonds give up value in exchange for stability, but for someone who has 15-20 years or more before retirement the volatility of the market is meaningless. Also, currently bonds hardly outrun inflation. Wouldn't it make more sense to be 100% stock until closer to retirement and when bonds start providing meaningful returns?
You could go with a 100% Life Strategy fund if you wanted a single fund solution with 100% stocks.
@@rob_bergerI'm more so looking for understanding as to the why of bonds. Where is the upside for people in these age groups utilizing them? I'm already 100% stock...60% IVV, 20% QQQ, 20% SLYV...but am I missing some critical fact as to why bonds for someone rather far from retirement are a worthwhile investment?
In a nutshell, I imagine there's other factors beyond just seeking the highest possible return. Diversification and correlation is a thing and bonds help. If the highest expected return was all that mattered then why stop at 100% stock? leverage up
Would having other etfs, stocks, and even additional target date funds in a retirement plan be a bad idea? I’m not sure if the target date fund assumes you don’t have other assets or if it even matters for it’s allocations over the years.
Well, TDR funds are designed to keep things simple. But yes, you certainly could have other funds. One idea is to have a TDR fund + one other fund targeting an asset class you think can boost overall returns (e.g., emerging markets or small cap value). If you have a lot of other funds, the key is just to understand your overall asset allocation. Personal Capital or Morningstar, among others, can help you do this.
Rob, does the expense ratio reflect the ratio of the underlying funds or just the target fund?
Yes. You pay just the one expense ratio. Note that it is typically higher than the ER of the underlying funds, which you pay in exchange for the convenience.
I’m 65, is the 2060 fund overly optimistic for me? Or is the 2050 more suitable?
Seriously though, my beef with these is allocations for novices that skew way too heavily foreign. As Mr Bogle, Buffet, Jonathan Clements and a host of others emphasize, it’s not necessary
A lot of people would love to see some TDF funds with 20%-25% ex-US.
same, 63....hard to get good advice at this age
But can anyone choose any target day fund regardless of age? If I were 60 today, can I choose a target day fund of 2050?🖐🖐🖐🖐🖐
What about black rock 2040 through my employer. ??
From what I've seen, Blackrock is a solid choice. They do have different 2040 funds, so important to understand exactly which one and how its asset allocation.
I still do not understand why invest in bonds.
You're about to find out.
Do you pay commissions twice? One for the target fund and one for the sub funds it invests in?
No.