Washington has morphed into the financial capital of the world, and we're here at the epicenter. By Janet Bodnar, Editor-at-Large April 6, 2009 No sooner had President Obama unveiled his budget and tax proposals than we at Kiplinger's got a phone call from a concerned reader in Grand Junction, Colo. She and her husband, who own a small business, were worried about the prospect of paying higher taxes and wondered if they should just pack in their hard work and retire. We told her that the budget wasn't yet set in stone and that, as proposed, taxes wouldn't rise until 2011. So she and her husband have time for tax planning, based on the guidance we're happy to provide.Suddenly Washington has morphed into the financial capital of the world, and we're here at the epicenter. Our location -- two blocks from the White House -- puts us and our sister publication, The Kiplinger Letter, in a unique position to update you on how the unfolding budget debate affects your wallet. Taking aim at targets. Another debate we'll be following involves target-date retirement funds. We've been fans of these one-stop investments, which give savers a diversified portfolio that becomes more conservative as their retirement date approaches. But a Senate committee has taken aim at these funds, particularly those designed for people planning to retire in 2010, because different funds "revealed a wide variety of objectives, portfolio composition and risk." Sen. Herb Kohl (D-Wis.) has asked Labor Secretary Hilda Solis and Securities and Exchange Commission Chairwoman Mary Schapiro to work on regulations "regarding the composition of target-date funds and the appropriate ratio of stocks and bonds." Mutual fund managers may disagree about investment strategies, but there's no reason to think that Hilda Solis or Mary Schapiro could do any better -- and no reason to think the government should even try. As one of our editors put it, "There's no law against crappy mutual funds." Advertisement But investors do need to know how to avoid crappy funds, and that's our bailiwick, too. For instance, one 2010 target fund, Oppenheimer Transition, was down more than 40% in 2008. But another, Vanguard Target Retirement 2010 -- a more conservative fund and one of our favorites -- lost just a little more than 20%. Not great, but not surprising, either, given that bonds and other investments designed to buffer stocks also tanked last year. More-aggressive target-date funds tend to keep a hefty allocation in stocks even as the target date approaches -- sometimes 50% to 60% for a 2010 fund -- on the grounds that people will benefit from stock-market growth in a retirement that could last 20 to 30 years. And the Employee Benefit Research Institute found that target-date funds have helped investors shift away from putting all or nothing into stocks. The best funds. Diversification is also key in choosing the Kiplinger 25, the annual listing of our top mutual funds. In addition to stock funds, the list includes different asset classes, such as bonds and commodities. Even though there were virtually no safe havens in 2008, spreading your assets, and your risk, is likely to serve you well over the medium and long term. And the next decade is unlikely to be as terrible as the past ten years. In fact, we're replacing several funds with more-attractive ones that have reopened. And if you or someone you know is facing one of the five most pressing financial problems in this recession, read our cover story for advice on how to cope. P.S. Look for our special issue, Mutual Funds 2009, on newsstands and at Kiplinger.com.