Mai said:
I split my 401k 50/50 between a 2055 TDF and an S&P 500 fund.
Same here. Feels like a good balance.
Checked my 2030 TDF the other day and it’s returned about 12% since I started. Not bad compared to other options, so I’m happy.
If I were you, I’d pick the best option in your 401k, then use a Roth IRA for more flexibility. I rolled over an old 401k into an IRA and got better returns by choosing ETFs and individual stocks.
I like to keep things simple. I’ve got a TDF in my 401k and an S&P 500 fund in my IRA. Together, they balance risk and diversification pretty well. Some years the IRA outperforms, some years the TDF does. Works for me.
My 401k is 80% S&P 500 and 20% in a 2065 TDF. It’s my way of adding diversification since my options are limited.
I use a Fidelity Freedom TDF in my 401k. It’s mostly stocks right now, but that changes as it gets closer to the target date. Your 401k choices can really limit what’s available.
TDFs are a great option if you want simplicity. They cost a bit more in fees, but they handle the adjustments for you.
If you’re okay with sacrificing some returns for stability, TDFs are a good pick. Otherwise, a total stock index fund will likely perform better over time.
My Fidelity stock fund is up 47% this year. If you’re young, take the risk while you can!
TDFs are more diversified and might give you better risk-adjusted returns over the next decade.
The usual advice is to go aggressive when you’re young and ease up as you age. That’s what TDFs do — they reduce stocks as the target date approaches.
Target funds can handle market drops better than pure stock index funds.
I keep about 10% in a TDF for some extra stability in my 401k. It’s part of my overall diversification.
TDFs are a bit conservative, but that’s why I use them in my TSP account for stability. If you want more risk, pick a target fund 10 years beyond your retirement date.
You could build your own TDF strategy. Decide your stock, bond, and cash mix and adjust it gradually. It’s cheaper and gives you control.
TDFs include international stocks and bonds, which haven’t been great recently. They also distribute at year-end, which could mean more taxes. But for most people, they’re easy to set and forget.
Pippin said:
TDFs include international stocks and bonds, which haven’t been great recently. They also distribute at year-end, which could mean more taxes. But for most people, they’re easy to set and forget.
You don’t pay taxes on gains inside a 401k until you withdraw.
Pippin said:
TDFs include international stocks and bonds, which haven’t been great recently. They also distribute at year-end, which could mean more taxes. But for most people, they’re easy to set and forget.
With TDFs, you don’t have to stick to the date that matches your retirement. Pick one with more risk or less, depending on your comfort level.
I don’t see the point in lower returns just for diversification. I’ve always gone with the S&P 500 for the best long-term growth.
Switching into bonds as you age is seen as safer, but it’s not always better if bond rates are low. I wouldn’t go all-in on a TDF unless it’s just part of your portfolio.