But First, Save 10: The One Simple Money Move That Will Change Your Life by Sarah-Catherine Gutierrez

But First, Save 10: The One Simple Money Move That Will Change Your Life by Sarah-Catherine Gutierrez

Author:Sarah-Catherine Gutierrez [Gutierrez, Sarah-Catherine]
Language: eng
Format: azw3
Tags: -
Publisher: Et Alia Press
Published: 2020-12-05T16:00:00+00:00


Use Target Date Retirement Funds

You get the idea of how you could invest that might resonate deeply. But how do you physically buy the index funds? What if I told you that you could buy everything you needed in one single fund?

The target date retirement fund is a fund that buys the funds you need on your behalf. It asks everyone within 5 years of retiring at 65 to put their money in sort of a fund stew, if you will, to be invested with the money of others, together for life. Same for folks within 10 years, 15 years, etc. You simply identify the date closest to when you turn 65 and put all your money in that fund. Then the fund, itself, will buy a mix of stocks and bonds appropriate to people targeted to turn 65 within a 5-year range of a year in the future (i.e. 2050, 2055, 2060, 2065).

Olivia is 23 and turns 65 in 2062, so she would choose a target date fund dated 2060, most likely.

The target date retirement fund means you don’t have to worry about picking funds, investing in them, rebalancing them, or even thinking about them. You put it in one fund, and it automatically takes you from roughly 90% stocks and 10% bonds in your 20s to about half and half at retirement. From there, it continues to make the account less risky (with less of a percentage of the retirement account in stocks and more in bonds).

I cannot believe what a beautiful thing these are. Some of the smartest people on the planet have made large, aggregate decisions on how the typical person ought to be invested at different points in their lives, and then we all get to benefit from some of the smartest science.

There are great target date funds that are simple with low fees and are offered by companies like Vanguard, Schwab, State Street, Black-rock, and others. These are becoming pretty standard in retirement plans, in fact, and I hope that by the time you are reading this that you will have one as an option.



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