Ask a Fool: Are Target-Date Retirement Funds Right for Me?
Among the investment options listed in your 401(k), you may see some target-date funds (also known as life-cycle funds). Generally speaking, these are the investment options with dates in the title, such as "Target Retirement 2030 Fund." They are also available for investment through IRAs or taxable brokerage accounts.
The main advantage of target-date retirement funds is simplicity. A target-date fund allocates your investment dollars in an age-appropriate mix of stock and bond investments, and then gradually shifts your allocation as you get older. For example, a fund designed for people who plan to retire in 2055 may have a rather aggressive 90% stock/10% bond allocation, while a fund designed for 2020 retirees may have a more conservative 50%/50% allocation. In short, these are designed to be all-in-one, zero-maintenance investments.
However, it's important to mention that many (but not all) target-date funds charge higher fees than comparable mutual funds and ETFs. In addition, they are generic, meaning that they don't take your personal risk tolerance and goals into account.
Source: Fool.com
