@ClementsMoney Saturday Critical Action – Consider a Target Date Fund
Welcome to the Saturday Critical Action. Each Saturday we take the weekly action from Jonathan Clements‘ blog Humble Dollar and “militarize” it for you. Jonathan Clements was a longtime personal finance columnist for The Wall Street Journal, and he offers great advice at the best price you can get…free. Here is this week’s critical action:
CONSIDER A TARGET-DATE FUND. Financial advisors push the notion that every investor needs a customized portfolio—and, indeed, we all like the idea that we have an investment mix specially designed for us. Yet most of us, whether we’re investing on our own or through an advisor, would likely fare just as well, if not better, with a target-date retirement fund.
We’ve featured the Thrift Savings Plan (TSP) target date funds – called the Lifecycle or L Funds – in a number of articles. We deep dove on them. They are definitely the easy way to manage your retirement savings. Are they too conservative? We discussed that this week. Read also about the changes that are coming for them.
Do I use the Lifecycle funds? Yes, I do. We have two TSP accounts, and as I start to take some money off the table and reduce risk, one of the TSP funds is invested in the Lifecycle 2050, which includes 18% bonds. That 18% of bonds is only 3% of my entire retirement portfolio, so I’m still 97% stocks and 3% bonds, but I’ve begun my slow march to my ultimate retirement portfolio of 60% stocks and 40% bonds.