Gearhead Jim
Full time employment: Posting here.
My employer now has various years of "Target Date" retirement funds, that start out heavily in stocks and gradually shift to more bonds as you near retirement. I could pick any target date I desire, not just my actual date; that would allow me to have a higher percentage of stocks than my actual date would produce.
The stock funds have done pretty well over the years, and have a very low expense ratio. I am satisfied with them.
However, I see a potential problem with the bond allocation. If we are, as I suspect, in a period of gradually rising interest rates; then the interest gains on the bonds will be somewhat (maybe a lot) reduced by capital losses on the market value of the bonds. That does not happen if I buy individual bonds and hold them to maturity. Of course, the plan might buy bonds and hold them to maturity, but the paperwork does not say that; I don't think so because time to retirement + expected length of retirement would require buying 40 years bonds even for an older guy like me.
What comments or suggestions do you have?
The stock funds have done pretty well over the years, and have a very low expense ratio. I am satisfied with them.
However, I see a potential problem with the bond allocation. If we are, as I suspect, in a period of gradually rising interest rates; then the interest gains on the bonds will be somewhat (maybe a lot) reduced by capital losses on the market value of the bonds. That does not happen if I buy individual bonds and hold them to maturity. Of course, the plan might buy bonds and hold them to maturity, but the paperwork does not say that; I don't think so because time to retirement + expected length of retirement would require buying 40 years bonds even for an older guy like me.
What comments or suggestions do you have?