Comments on: The Problem with Targeted Date Retirement Funds http://www.americanconsumernews.com/2007/03/the-problem-with-targeted-date-retirement-funds.html News for Consumers in Changing Times Sun, 12 Feb 2012 04:49:00 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Chris Burgwald http://www.americanconsumernews.com/2007/03/the-problem-with-targeted-date-retirement-funds.html/comment-page-1#comment-396 Chris Burgwald Tue, 13 Mar 2007 05:05:00 +0000 http://www.americanconsumernews.com/2007/03/the-problem-with-targeted-date-retirement-funds.html#comment-396 I tend to agree with the other commenters; my 401k is in Vanguard's 2035 fund, and as Him stated, the expense ratios are rated; as he also noted, if a particular Target Retirement fund isn't aggressive enough, just invest in the one that "matures" 5 or 10 years later. And as anon said, using these funds actually cuts down on fees (only one fund rather than four, five, or more). I tend to agree with the other commenters; my 401k is in Vanguard’s 2035 fund, and as Him stated, the expense ratios are rated; as he also noted, if a particular Target Retirement fund isn’t aggressive enough, just invest in the one that “matures” 5 or 10 years later. And as anon said, using these funds actually cuts down on fees (only one fund rather than four, five, or more).

]]> By: Anonymous http://www.americanconsumernews.com/2007/03/the-problem-with-targeted-date-retirement-funds.html/comment-page-1#comment-356 Anonymous Thu, 08 Mar 2007 15:09:00 +0000 http://www.americanconsumernews.com/2007/03/the-problem-with-targeted-date-retirement-funds.html#comment-356 Another advantage of these funds that the poster completely misses is that they effectively let you own more than one fund (without needing to actually buy more than one fund). With Vanguard anyway, these funds are just a basket that puts a percentage of money in some of Vanguards' other funds, as mentioned above. If you were to buy that same asset allocation yourself, you would need to have more total money in your Vanguard account to overcome the $5,000 limit under which they will charge you a small extra fee for having less than that in a fund. You might also not even have enough money (especially in an IRA during its first couple of years) to make the minimums for all the funds in your target allocation, especially if you want to put only a low percentage of your money in something like the bond index fund.<br/><br/>I agree that for larger accounts it tends to make more sense to figure out the proper allocation yourself. And if you think the targeted date fund is close to your desired allocation, but not quite, you could always buy some other funds separately to adjust your overall percentage in the direction you want to go.<br/><br/>I don't think this blog post makes any sense at all, at least with Vanguard. Another advantage of these funds that the poster completely misses is that they effectively let you own more than one fund (without needing to actually buy more than one fund). With Vanguard anyway, these funds are just a basket that puts a percentage of money in some of Vanguards’ other funds, as mentioned above. If you were to buy that same asset allocation yourself, you would need to have more total money in your Vanguard account to overcome the $5,000 limit under which they will charge you a small extra fee for having less than that in a fund. You might also not even have enough money (especially in an IRA during its first couple of years) to make the minimums for all the funds in your target allocation, especially if you want to put only a low percentage of your money in something like the bond index fund.

I agree that for larger accounts it tends to make more sense to figure out the proper allocation yourself. And if you think the targeted date fund is close to your desired allocation, but not quite, you could always buy some other funds separately to adjust your overall percentage in the direction you want to go.

I don’t think this blog post makes any sense at all, at least with Vanguard.

]]> By: Daisy http://www.americanconsumernews.com/2007/03/the-problem-with-targeted-date-retirement-funds.html/comment-page-1#comment-355 Daisy Thu, 08 Mar 2007 09:34:00 +0000 http://www.americanconsumernews.com/2007/03/the-problem-with-targeted-date-retirement-funds.html#comment-355 I agree with Him about the expense ratio for the Vanguard target funds, which is where I have my Roth IRA (in the 2045 fund).<br/><br/>Also for those in the federal government, the TSP L funds expenses are based on the "expenses of the G, F, C, S, and I funds in proportion to their allocations in the L funds."<br/><br/>So, for me, expenses aren't a big issue. To the extent I'm not 100% happy with the allocations, I use index funds/etfs in my taxable accounts to adjust overall allocation. I agree with Him about the expense ratio for the Vanguard target funds, which is where I have my Roth IRA (in the 2045 fund).

Also for those in the federal government, the TSP L funds expenses are based on the “expenses of the G, F, C, S, and I funds in proportion to their allocations in the L funds.”

So, for me, expenses aren’t a big issue. To the extent I’m not 100% happy with the allocations, I use index funds/etfs in my taxable accounts to adjust overall allocation.

]]> By: Him http://www.americanconsumernews.com/2007/03/the-problem-with-targeted-date-retirement-funds.html/comment-page-1#comment-347 Him Wed, 07 Mar 2007 22:40:00 +0000 http://www.americanconsumernews.com/2007/03/the-problem-with-targeted-date-retirement-funds.html#comment-347 "The first problem is that you are paying twice for mutual fund management fees."<br/><br/>Actually that isn't correct. The expense ratios are the weighted expense ratios of all the funds they invest in. At least for the Vanguard funds this is true.<br/><br/>"A lot of these funds also invest far too conservatively."<br/><br/>Again, the Vanguard 2045 fund is 90% stocks, 10% bonds. If you need a fund that invests more aggressively, then one could just invest in the 2050 fund.<br/><br/>Personally, until I get my retirement funds to 100K +, I think that a target retirement fund is one of the best ways to diversify. “The first problem is that you are paying twice for mutual fund management fees.”

Actually that isn’t correct. The expense ratios are the weighted expense ratios of all the funds they invest in. At least for the Vanguard funds this is true.

“A lot of these funds also invest far too conservatively.”

Again, the Vanguard 2045 fund is 90% stocks, 10% bonds. If you need a fund that invests more aggressively, then one could just invest in the 2050 fund.

Personally, until I get my retirement funds to 100K +, I think that a target retirement fund is one of the best ways to diversify.

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