| Target retirement funds are mutual funds that do | | | | safe. A year and a half later they had lost 30% |
| it all for you ... one stop shopping. You tell them | | | | of their retirement assets. |
| when you plan to retire, and they manage your | | | | The mutual fund companies and the investment |
| money in a diversified investment portfolio that | | | | business in general see things differently than |
| gets more conservative as your retirement date | | | | many of their customers do. I spent over 20 |
| approaches. Once you retire, your money is | | | | years working as a stock broker and financial |
| managed conservatively for you. | | | | planner, working directly with the investing public. |
| That's their story, and unfortunately they are | | | | If clients wanted a high degree of safety, that's |
| sticking with it. I suggest you look before you | | | | what I gave them. If they were willing to accept |
| leap. Your idea of conservative might differ from | | | | a moderate risk, I recommended the appropriate |
| theirs. For example, let's say that you plan to | | | | stocks and bonds. |
| retire in 5 to 10 years. What percent of your | | | | What you need to know about target retirement |
| retirement nest egg do you want at risk in the | | | | funds and the investment business in general is |
| stock market? Or, if you plan to retire in 30 | | | | that the folks in charge there don't necessarily |
| years, what's your comfort level with owning | | | | think like you and I. I include myself here, because |
| stocks? How about when you are already retired? | | | | I was routinely scrutinized for disagreeing with |
| Every mutual fund company has its own way of | | | | management (my sales managers, and their |
| diversifying assets in these target retirement | | | | superiors). |
| funds, and you might be surprised when you look | | | | In management's view, most people invest too |
| at these numbers. | | | | conservatively; and it's their job (and mine) as |
| For people a few years away from retirement: | | | | professionals to show folks how to invest to be |
| anywhere from 30% to as much as 80% of | | | | more aggressive. In other words, they believe |
| your money could be invested in stocks in a | | | | that clients (people) should be forced-fed stocks |
| target retirement fund designated as appropriate | | | | and stock funds whether they like it or not, |
| for you. | | | | because it's for their own good. |
| If you are young and expect to work another 20 | | | | Between 1982 and 2000, this way of thinking |
| to 35 years, expect 80% to 90% of your assets | | | | worked in favor of the clients (investors), |
| to be invested in the stock market if you go with | | | | because the stock market cooperated and went |
| the appropriate target date. Example: You plan to | | | | up the majority of the time. Then, in 2000-2002 |
| retire in about 2040, hopefully a little sooner. You | | | | the stock market took a beating; and it happened |
| have a 401k plan that offers a Target Retirement | | | | again in 2007-2009. |
| 2040 Fund, so you go with it and invest | | | | These are tough times to be an investor if you |
| everything there. | | | | don't know how to invest. If you are to succeed |
| If you are retired and had your nest egg in the | | | | financially, you're going to need knowledge of |
| safest of these funds, called a retirement income | | | | investments and investing. Target retirement |
| fund, why did you lose money between | | | | funds are the easy way to go, but look before |
| September of 2008 and March of 2009? Take a | | | | you leap because most of them involve more risk |
| closer look at your fund's annual report. You likely | | | | than first meets the eye. |
| had more money invested in stocks than you | | | | Once you've learned how to invest you might still |
| thought, and the stock market was down about | | | | want to own some of these funds, but you won't |
| 40% during that time period of just a few | | | | want to bet your entire retirement savings on |
| months. | | | | them. You can tailor your own investment plan, |
| In late 2007, some folks getting ready to retire in | | | | one that suits YOUR comfort level, once you are |
| just 2 or 3 years had their retirement savings in a | | | | informed and know how to invest. |
| target retirement 2010 fund, thinking it would be | | | | |