How To Pick The Proper Target Retirement Date 401k Plan

July 19, 2018

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Saving for retirement can be a confusing tasks. There are several investment plans to choose from with confusing disclosures and strange fees.  It’s no wonder that more than half of employees with 401(k) plans invested only in a single target-date retirement fund; an all-in-one portfolio that uses a milestone date as a target to begin withdrawing funds.  The good news is these funds are performing well. Over the five years ending in 2017, investors who held a single target-date fund earned median returns of 11%. However you may want to take a closer look at the target-date fund you're investing in as most companies use them as the default plan. So it may not be the target date in which you are looking to retire. The default retirement age is 65.  If you choose a target date that is earlier or later than your planned retirement date, your fund may be invested too conservatively or too aggressively as the assets in these plans generally shift from risker stocks to safer bonds as the target date draws closer. You also may end up saving too little to meet your retirement goals. Make sure to pick a target date that is closest to your anticipated retirement age and make it a habit to review it at least once a year to make sure it is performing to your satisfaction.

SOURCE: Consumer Reports

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