How is your 401k looking? Does it seem like you don’t know everything you want to know about it, or everything that you would like to know? Even if you think you’re an expert, there are still some things you’re probably missing — like when you should and you shouldn’t use a target date fund, or if you should at all. “401(k) Experts Warn When NOT To Use A Target Date Fund” explains why you should avoid just that.
Key Takeaways:
- Target date funds are portfolios — usually made up of mutual funds — whose mix of securities like stocks, bonds and cash becomes more conservative as the target date (usually retirement) approaches.
- There’s no mistaking the soaring popularity of target date funds. Ninety percent of 401(k) type plans used target date funds as of 2015, the latest year for which Aon has data.
- To avoid saddling yourself with a retirement account balance that is unnecessarily small, Aon says workers should use target date funds exclusively in their 401(k)s. That way you won’t water down the benefits of those funds.
“There’s no mistaking the soaring popularity of target date funds. Ninety percent of 401(k) type plans used target date funds as of 2015, the latest year for which Aon has data. That’s way up from 33% in 2005.”
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