The problem with Target Date funds are the investors that use them

A target-date fund (TDF) could be an attractive investment alternative for a participant that can’t be bothered with allocating their account balance.

The reason I have trepidation about target-date funds is because of how certain participants use it, as well as the financial advisors that don’t have a word with these participants.

According to data from Vanguard, 27% of use TDFs along with other 401(k) mutual funds. Another 2% use more than one target-date fund; 4% use two or more TDFs as well as other funds. So about a 1/3rd of participants are using TDFs incorrectly and plan providers and plan sponsors are ignoring this big fact.

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