Target Date Funds May Be Too Conservative for Long Retirements
Default retirement funds might not grow aggressively enough to last decades. Here's what investors should know.
If you're coasting on a target date fund and calling it a retirement plan, you might want to look closer. These funds — the default choice in millions of 401(k) accounts — may not be built aggressively enough to carry you through what could be a 30-year retirement.
The core problem is simple: target date funds automatically shift toward bonds and cash equivalents as you approach retirement. That sounds prudent, but it also means your portfolio could lose the growth engine you need when you're living longer than ever. A more conservative allocation hits right when your money needs to work hardest.
Read more Retirees Need Stocks — The Real Question Is How Much →
Longevity is the risk that doesn't get enough airtime. With life expectancies climbing, a 65-year-old today could realistically need that nest egg to stretch into their mid-90s. A fund that de-risks too early essentially bets against your own survival — and that's a bet you don't want to win.
The tradeable angle here is real. If your target date fund is glide-pathing you into low-return territory too soon, you may need to supplement it — think broader equity exposure, dividend growers, or even a small tilt toward international stocks. Passive set-it-and-forget-it works until it doesn't, and for retirement income, the stakes are too high to stay passive.
Bottom line: don't assume your fund's target year means it's optimized for your life expectancy. Review the equity allocation inside that fund today. Continue reading at MarketWatch.com
