Why Target Date Funds Miss the Mark

Despite the popularity of target date funds, investors should dig deeper when choosing these easy-to-use retirement savings options.

A man peeks out from behind a target.
(Image credit: Getty Images)

Over the last decade, target date funds have increased in popularity among investors. Target date funds are especially prevalent within 401(k) plans, as they are often promoted to participants as a “set it and forget it” investment solution. According to the Investment Company Institute 2020 Fact Book, nearly $1.5 trillion is now invested in target date funds, the vast majority within 401(k) plans.

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Header Cell - Column 0 T. Rowe Price Retirement 2025 FundVanguard Target Retirement 2025 FundFidelity Managed Retirement 2025 FundDimensional 2025 Target Date Retirement Income Fund
Row 0 - Cell 0 Ticker: TRRHXTicker: VTTVXTicker: FIXRXTicker: DRIUX
Asset Allocation70% equity / 30% fixed60% equity / 40% fixed47% equity / 53% fixed35% equity / 65% fixed
2020 annual return14.7%13.3%13.1%17.5%

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Mike Palmer, CFP
Managing Principal, Ark Royal Wealth Management

Mike Palmer has over 25 years of experience helping successful people make smart decisions about money. He is a graduate of the University of North Carolina at Chapel Hill and is a CERTIFIED FINANCIAL PLANNER™ professional. Mr. Palmer is a member of several professional organizations, including the National Association of Personal Financial Advisors (NAPFA) and past member of the TIAA-CREF Board of Advisors.