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Target-Date Retirement Funds: 5 Top Fund Families

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Investors are flocking to target-date retirement funds. These funds, which often are the default option in workplace 401(k) plans, received $70 billion in net inflows last year, bringing their total assets to over $1 trillion, according to a new report from Morningstar.

Most investors don’t have much expertise in building a portfolio of mutual funds. But target-date funds – which invest across several asset types, in different allocations, as you age – do it all for you. All you have to know is what year you plan to retire. If you plan to retire in 22 years, you’d pick the Vanguard Target Retirement 2040 Fund (VFORX), for example. The fund will become more conservative as you get closer to taking your money out in retirement.


Expenses on these funds are falling. The annual asset-weighted expense ratio of target funds dropped from 0.91% five years ago to 0.66% at the end of last year, according to Morningstar, which supplied the data for this article. (Asset-weighted expense ratio tells you the expense ratio of the average dollar invested in the funds.)

All five of the target-date fund families offerings reviewed here include quality products – good enough, indeed, for any investor who wants a one-decision investment plan.

My advice no matter which fund you employ: These funds are designed for everyone. Consequently, even the best of them tend to lean a bit too conservatively for some tastes. You may want to buy as if you were five years younger, which will get you a slightly more aggressive mix.

SEE ALSO: The 25 Best Low-Fee Mutual Funds You Can Buy

Data is as of May 16, 2018.


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