When I started my first job after college — before I became a financial planner — I was handed an enrollment packet for the company’s 401(k) plan and told to pick what I would be investing my retirement savings in. Like many people, I had no idea what the right choice was so, naturally, I selected what I thought was the most simple investment option — a target-date fund.
Looking back, I find it almost humorous how little guidance I was provided when it came to which investment option was appropriate for me. While I knew there were risks involved with investing, such as the potential for losses, I didn’t fully grasp what risks were involved when using target-date funds. In this post, we’ll explore the important realities of target-date fund glide-paths, the risk associated with these funds for those nearing retirement, and the steps that need to be taken by investors and plan sponsors to mitigate these risks.
If you have questions about your specific situation, feel free to reach out to me. We provide ongoing financial planning and active investment management services to clients throughout Central Indiana and across the country from our offices located in Indianapolis, Indiana.