Your Retirement Fund Might Be Playing It Too Safe

If you have a 401(k) retirement account at work, there's a good chance your money is in something called a target-date fund. But some experts think these funds might be costing you money.

What Are Target-Date Funds?

Target-date funds are like autopilot for your retirement savings. You pick the year you want to retire (like 2040 or 2050), and the fund automatically adjusts your investments as you get older. When you're young, it invests mostly in stocks (ownership shares in companies that can grow in value but also go up and down a lot). As you near retirement, it shifts more money into bonds (loans to companies or governments that pay steady interest but grow less).

These funds are incredibly popular — $4.8 trillion is invested in them, and 84% of workers who have the option use them. They're especially helpful for people who don't know much about investing or don't want to manage their retirement money actively.

The Problem: Playing It Too Safe

Critics say these funds start adding bonds too early. For example: • If you plan to retire in 2040 (about 15 years from now), Vanguard's fund already has 25% in bonds • By age 65, it jumps to 50% bonds • By age 72, it's 70% bonds

Why does this matter? Stocks historically grow much more than bonds over long periods. With Americans now living to an average of 79 years, you might need your money to last 20-30 years in retirement. Having too many bonds too early could mean missing out on growth that helps your money last longer.

The Bottom Line

Target-date funds aren't bad — they're much better than not saving at all. But if you're willing to learn a bit about investing, you might do better by keeping more money in stocks for longer, especially when you're young and have decades until retirement.

This is an AI-generated summary. Read the original article at: https://www.marketwatch.com/story/target-date-retirement-funds-are-more-popular-than-ever-critics-say-you-can-do-better-533adf46?mod=mw_rss_topstories