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Target date funds? good or bad?
Old 02-25-2014, 04:34 PM   #1
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Target date funds? good or bad?

Good evening ER comrades! Soon to be 55 and plan on ERing end of Aug. House paid off.Total living expenses equals 1200 dollars a month.This includes retirement employee health care 150 a month,insurance and taxes on house 200 a month,car and ins.250, water bill 50,phone 50.Food and entertainment about 500 .Dear Gf pays utilities.God bless her! Income from two paid off rentals 1100 a month,1200 pension and 1000 from 401k a month will give me about 3300 a month in income.My 401k includes 175k in cash and 175k in a TRowe Price retirement target date fund T4.Allocation is 40% equities and 60% bonds.I just realigned my portfolio after this stock market run up. I figure I will use the 4% withdraw method till age 62 then reevaluate my position.Anyone use the target date funds?I need to keep money in my 401k as I get penalty free distributions, so I cant roll over to an IRA.Thoughts would be greatly appreciated! Thanks!
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Old 02-25-2014, 04:49 PM   #2
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There's nothing wrong with target date funds, and the TRP offerings aren't especially expensive. Your %age in bonds seems pretty high for a "youngster".
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Old 02-25-2014, 10:09 PM   #3
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On s scale of 1-10 of awful investments vs excellent investment investments. I think target date funds are 7 or 8 depending on the fund family. You can do better but you can also do much much worse.
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Old 02-25-2014, 10:31 PM   #4
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Not sure if your 50% cash is included in your 40/60 allocation (target date fund would then be 80/20). If so, that is a fairly conservative choice. The cash would supply a decent buffer against a bear market. If the target date fund is 40/60, that's only 20% equities and super conservative. I'd consider raising your equities.

One problem with a target date fund will be that it combines bonds and equities. When you sell, you'll be selling bonds and equities. It might be nice to have the flexibility to sell only bonds or only equities to allow better flexibility in staying balanced and handling bear or bull markets. One way to do that would be with a far future target date fund and cash or a bond fund, depending on what's available in your 401k.
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Old 02-26-2014, 06:49 AM   #5
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I like the TRP target funds. I think generally they have a good allocation and broad market exposure.

I also hold bonds and other vehicles, so I don't have target funds as a strategy per se, as much as an easy broad fund with fairly good results. You don't kill the market, but you rarely get killed either.
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