Show 90 - Target Date Funds and When to Move One with Mary Ann Sullivan
In this episode, I discuss target date funds with Mary Ann Sullivan and how to know when it is time to build a more nuanced investment portfolio.
9/3/20251 min read
Target Date Funds are a fantastic invention, don’t get me wrong. Having a single relatively low cost fund to invest in for the long term instead of multiple high cots funds being pushed by questionable salespeople is exactly what I want. But that doesn’t mean theye’re perfect, especially not for a more savvy investor. And I guess that, if you’re listening to this show, you are (or want to be) a more savvy investor. So let’s discuss the target date fund and how to tweak it.
Show Notes
Discussion of Bonds episode
Tax planning for teachers episode
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Recommended Books (Amazon Affiliate Links)
The Simple Path to Wealth by JL Collins
Key Ideas
There are benefits of Target Date Funds for teachers just getting started with investing such as simplicity and low risk.
But there are limitations to TDFs, especially if you have a pension or want more control over your portfolio.
You can know you’ve outgrown Target Date Funds when you are ready to optimize.
Strategies like a three-fund portfolio and bond ladders are better for more flexibility and tax efficiency
Bonus Tip
Here is a bonus tip I didn't get to in the episode.
While I don’t recommend bonds on a regular basis, JL Collins has pointed out that a 10-25% bond allocation can out perform a 100% stock portfolio. So if you want to invest in bonds consider keeping it in this range. The Target Date Fund will usually go way past 25% very quickly.