Are target date funds, which adjust diversification automatically, preferable to investing in standard mutual funds?
There is no correct answer, because it depends on your personal situation and how comfortable you are managing your own asset allocation. For many people, target date funds are a simple, all-in-one solution that requires only one decision – choosing the target fund date closest to your retirement date. If you prefer a more hands-on approach, you might want to build your own asset allocation from among the funds available in your district’s plan. However, you will need to review them each year to make sure they are still in line with your timeline and risk tolerance. It’s important to remember that no fund – including target-date funds – can guarantee that you’ll meet your retirement savings goals.
If you like the simplicity of target-date funds, make sure the ones available through your district have reasonable fees and expenses.
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