Target-date funds are a popular investment option in workplace retirement plans. But do you understand how they work and how you might use them? This week’s digest gives answers in two articles that cover what you need to know about target-date funds and strategies you might consider.
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Making the Most of Target-Date Funds Before and During Retirement |
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It’s clear to most of us that we can take more risk when we’re young than when we’re old, but how do we know how much risk is right at any particular age? In recent years, more and more investors have turned to target-date funds when saving for retirement to answer this question. Target-date funds adjust risk by shifting from riskier assets in the early years to less risky assets in the later ones. In this new article, Chris Pedersen reveals a strategy that combines an equity fund with a target-date fund to help capitalize on low drawdown risk years.
Some of the topics covered in the article include:
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Do target-date funds take age-appropriate risk?
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The rationale, research, details and benefits associated with a two-fund approach
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Simulated portfolio balances using the two-fund approach in retirement
Pedersen’s two-fund strategy is fairly easy to apply in a wide range of circumstances, including early retirement, nearing retirement and in retirement. If you are interested in learning more about this strategy, read on.
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A Second Look at How Target-Date Funds Change Their Allocations |
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Target-date funds offer the premise of a one-stop solution for investors seeking professional allocation strategies. However, there remains confusion about how to use target-date funds. Many employers use target-date funds as the default investment alternative for new defined-contribution plan enrollees. In this article, AAII’s Charles Rotblut explains that, though target-date funds simplify the process of investing before and in retirement, there are still decisions that need to be made on the part of the investor.
Some of the topics covered in the article include:
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The target-date fund allocations of different fund families
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How target-date funds have evolved over the last 10 years
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How to tell if you need a target-date fund
Whether or not a target-date fund is right for you ultimately depends on whether you want a simplistic but less customized solution or are willing to handle some complexity and extra effort to achieve greater customization. There is no universal right answer. You will need to determine what makes the most sense for your personal situation.
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Member Question
More than 80 million Americans are expected to get their coronavirus tax rebates this week. Have you or your family members received a stimulus payment yet?
A) Yes
B) No
C) Do not qualify
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Be sure to vote on this week’s question for the opportunity to offer your insights on our open-ended question. |
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Coronavirus Support for Investors |
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 The nonprofit Alliance for Investor Education (AIE) has put together resources for individual investors during the coronavirus pandemic. Called “Investing During a Pandemic: COVID-19 Investor Support,” the new section of the AIE website features 10 resources from its member organizations, including AAII. You’ll find valuable tips at this page to help you make the best financial decisions during this challenging time. More » |
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