How To Handle Your 401 (k) Without Lifting a Finger | Personal finance

0

The main advantage of target date funds is that they allow more people to invest for their retirement. The reality is that many people don’t like to optimize their investments or read pages of financial statements. They are perfectly happy to invest permanently and to let the maturing fund do all the work.

Image source: Getty Images.

Solid returns without the hassle

Remember that a maturing funds is a “fund of funds”, which means that it is an investment that includes other funds. So when you invest in a target date fund, say three decades from now, you are actually investing in three to five underlying funds whose weightings will change over time.

You still have the option of purchasing those same funds directly and rebalancing your account yourself. Some people prefer this extra control. It would also save you the “wrap-around fees” or the cost of consolidating funds and presenting them as a single target date fund that can be chosen from an investment menu.

Also remember that it is better to see your 401 (k) not as one account but in the context of your whole financial situation. If you have substantial assets outside of your 401 (k), the optimal investment for your retirement plan may be completely different than for someone just starting out in their career.


Source link

Share.

Leave A Reply