Target date retirement funds have become quite popular.
And I actually like them. But it’s important to understand what they are, what they are good at, and what they are bad at.
And that is what we will do on this episode!
Target date retirement funds are funds that many brokerages offer in which they base the asset allocation on the estimated year that you plan to retire.
The funds are generally composed of index funds in select stock/bond allocations that decrease in risk as you approach your targeted retirement year. The fund automatically performs asset rebalancing without you needing to actively do anything.
The disadvantage of target date funds are that their expense ratio is typically a bit higher than just doing the work yourself. However, the increase in fees is not typically large.
So, use them is you like them but also understand what the “price” is for using them!
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