Common Sense Comments for Workplace Retirement Plans
Target Date Funds are prevalent in workplace retirement plans. You’ll find them other places, but overwhelmingly they are found in things like 401(k) Plans. The idea behind them and their appeal is fairly easy to understand. People want a point-and-shoot “do it for me” option when it comes to how to invest their money for retirement.
These types of investments are easily identified by the numbers in their titles, such as “2040” or “2060”. The design of these types of investments is made to be point-and-shoot; investors simply select the year that is closest to when they think they might retire. A 55 year old, looking to retire at age 65 might then select the 2025 fund, since that’s about 10 years from now. Easy enough, right?