TDF

AwesomeAsian

Yup, leave it to the experts and forget about it is the best strategy. I’d say pick a year that’s slightly higher than your retirement year since TDFs tend to be conservative when it comes to bond ratios. So for example I’m going to be 65 in 2060 but I picked a 2065 TDF because I want to see more growth.

u_spawnTrapd

You’re already in a pretty solid spot honestly. The only thing that stands out a bit is the 21% cash plus 16% bonds. Combined that’s a fairly heavy defensive tilt, which is fine if it helps you sleep at night, but you might want to sanity check how many years of expenses that actually covers. Sometimes people end up more conservative than they need. The individual stocks piece is another one. Even if it’s mostly big names, 13% is still a decent chunk this close to retirement. Not saying you have to dump it, but it’s worth asking if you’re comfortable with that volatility right when sequence of returns risk matters most. Also with the TDF plus separate index and bond allocations, you’re right there’s overlap. It’s not wrong, just a bit messier than it needs to be. Simplifying could make rebalancing and withdrawals easier once you’re actually retired. Big picture though, this looks like someone who’s already thought it through. At this stage it’s more about tightening and aligning with your withdrawal plan than making big shifts.

Ahamadrayasbaboon

Daily DCA and annual lump sum accounts are ~ 40%SPMO, 20%QQQM, 10%VUG, 10%VONG, 10%SPHQ, 10%SGOV.  Every 2 weeks is like 90%FXAIX (SP500), 10%Vanguard TDF.  Retard port has all sorts of shit, and is a margin account. 

CarnageAsada-

lol, I traded my TDF into FXAIX when it was down and the next day it rallied about a month ago. I did the same thing with my ladies TDF and it rallied the next day again. I decided to diversify and fuck the dips all together but keep what I already have in FXAIX.

Gemballa996t

Far dated TDF's that are mostly equity and are well diversified outperformed the Sp500 last year due to their international exposure.

ZIP-King-of-rock

This has been a very helpful conversation, so THANKs for that! A few things: 1) TDF = 2030; 2) I do have too much $$ in cash, I never thought about it that way. I guess I just want to be ready for upgrading my home or a new car, but I realize that makes no sense when the money would be available anyway with a slight delay, interesting...

SuUU2564

I really think your $ number matters not just %. I assume your cash is in treasuries also? In taxable? How much is that in $? Look at your TDF and how much of that is now bonds? Could be up to 50%. To me, too much in bonds overall. But the time to fuss with those was years ago really. Anyway, to me, the real $ number is missing for you. Are you retiring at FRA and with Medicare ? Not earlier?

Netmannc

My Vanguard TDF is fantastic and sophisticated. A fully diversified and automtically rebalanced fund for the low cost of .08% is really really hard to beat. I am not sure why some people feel that they are smarter than a professional investment firm. There are literally thousands of scenarios and back-testing from highly educated finance professionals to set these funds up. Another thing would be that all the major firms tend to agree and match each others approach for their TDFs. Why in the world would I think that I am somehow smarter or better equipped to handle my own investment decisions or pay some financial advisor tons of money to do so when I have a TDF?

Netmannc

My Vanguard TDF is fantastic and sophisticated. A fully diversified and automtically rebalanced fund for the low cost of .08% is really really hard to beat. I am not sure why some people feel that they are smarter than a professional investment firm. There are literally thousands of scenarios and back-testing from highly educated finance professionals to set these funds up. Another thing would be that all the major firms tend to agree and match each others approach for their TDFs. Why in the world would I think that I am somehow smarter or better equipped to handle my own investment decisions or pay some financial advisor tons of money to do so?

WasteProfession8948

Sure! TDFs are great for their simplicity and the glide path as you near retirement. The problem is that everything is bundled. You can’t just sell the bonds in a down market or the equities in a bull market for your retirement income - you sell the packaged shares. That means you are selling equities when they are down, etc. there’s no way around this with a TDF. With a three or four fund portfolio you get to pick which part of your portfolio to sell when. That’s granular as opposed to the selling of the whole required with a TDF.

cfaatwork

It's both, actually. In taxable accounts, if you own a TDF (or most any kind of mutual fund), there will be income/cap gains distributions throughout the year. These are distributed out to owners whether or not you make any trades to realize gains. If you look up the distributions tab for FFIJX or VLXVX (Fidelity 2065 or Vanguard 2065), you will see the amounts. Just by holding the funds you are taxed. As the price grows over time, you are taxed again any time you sell at a gain. This is a big reason why mutual funds are strongly recommended to be held in qualified accounts versus taxable accounts, where ETFs are much more tax efficient. ETFs (generally) do not carry out gains during the year given their structure. You do owe tax still when sold at a gain in a brokerage account, though.

Sassy_Bandit

There is nothing inherently wrong with them but you often see them in places where people have a matched pension fund with one provider, and they ALREADY are stuck paying huge fees..I remember when I got my pension it was like.. Age 25: TDF for retirement in 40 years TDF allocations: 60% US stocks - in a fund from the same company as the TDF with a 0.5% fee 39% world stocks - 1% fee 1% bonds - 1% fee TDF fee: 2% And I could just go in and like, manually allocate my contributions to the funds making up the TDF instead of the TDF, and save ~1% in fees per year. And you would not BELIEVE how many people I was totally unable to get to switch off the TDF. I don't think I persuaded a single one out of 10 people I tried with, all engineers. They just insisted they preferred to have "someone else looking after it", no matter how many times I explained they could just copy it and get like $1000 per year for 5 mins of work. Fees have come down in the past 10 years but it still bothers me lol

2mnyq

Ok, then that distribution will be taxable. My view is (and I can be wrong) is that, suppose the TDF starts with a 90% Stocks and 10% bond. Then 10 year down the line, it sell its stocks and buys bonds to make the ratio 50:%0. Now my understanding is that the gains from the sale of the stocks (if not distributed) are used to buy Bonds, those gains are not taxable to the end TDF share holder.. For the end user, once you sell your TDF shares, that is when your gains become taxable. Is my understanding correct?

Buck169

Due primarily to the growth of the Magnificent Seven? If the AI doomers are right, the TDF may do better than the S&P in the next decade. Probably not, but maybe...

Buck169

Yeah, the "higher expenses" complaint for TDFs seems pretty trivial when you are looking at a TDF with a 0.08% ER and a single-class ETF with a 0.03% or 0.04% ER. Even in the long term, those differences in your results are like the noise in a few days or weeks of normal market fluctuations, if I'm not mistaken. Tell me how wrong I am!

how33dy

I had a TDF for a quite few years. I was lazy. It had a higher risk profile than the S&P500 but consistently underperformed the S&P500,

Citryphus

I think a lot of people have fixated on not owning any bonds because for about 15 years of ZIRP bonds paid almost nothing. Then, rampant inflation from pandemic fiscal policy caused the Fed to rapidly raise rates, and bonds got decimated. Now, however, bonds offer decent yields and I think many people have not updated their opinion. They may now be overestimating the drag of a TDF being in about 10% bonds for most of your working life. Target date funds underperformed not only because of a small bond allocation but because they maintain an international stock allocation and the US stock market beat the rest of the world by a mile for about two decades. That is changing a bit and is not guaranteed to continue. The hard thing about being diversified is that you always have some part of your portfolio that is underperforming. If you think holding global stocks and a small but growing allocation to bonds is a good idea regardless of past performance then there's really no reason not to use a TDF in a retirement account.

2mnyq

IMHO the big advantage of Target Date funds is that they re-balancing is not a taxable event in TDF. If you run your own a ETF and Bond portfolio, once you start re-balancing by selling ETF and buying bonds, you will get hit by the 15% LTCG tax. The above point is moot, if you redirect all your future investments towards bonds at your target date without selling ETF to re-balance the portfolio.

loyalwolf186

What's the fee for your TDF? 

LavishnessLate2905

TDF's are great! I prefer funds with a more aggressive "active" management style, which definitely do seem to outperform the "passive 3 fund" investment style. For example the Fidelity "Freedom" series of funds.

No_Shine_1562

The "seasoning" rule exists for a real reason — Facebook's 2012 IPO destroyed retail capital before it normalized, and that was a company with audited financials and revenue. SpaceX and OpenAI are different beasts: privately marked at $400B+ and $300B+ respectively, with revenue/valuation multiples that would be 25-40x even on optimistic forward numbers. The index providers' incentive to bend rules is real — passive AUM has crossed $25T globally and license fees scale with inclusion. But MSCI and S&P both got burned on the China A-share inclusion in 2018 when they front-ran governance reforms; they're more cautious now than the post tweets suggest. The mechanical problem you're naming is real for target-date funds though. A 60-year-old in a 2030 TDF didn't sign up for SpaceX exposure, and the prospectus disclosure on float-adjusted weighting is opaque enough that most retirees won't notice until the first 30% drawdown. Worth pinging your plan administrator if your TDF tracks total market — that's where the question actually has teeth.

Mysterious-Entry-357

Fidelity or Vanguard TDF for lower fees and similar results.

LavishnessLate2905

There is no "one size fits all" answer. It depends on your habits and goals. \+39% gains since 2019 is not great, not terrible. About what I would expect from a "conservative" portfolio (such as iShares AOK for example, which is 30% stock and 70% bonds). As my own personal benchmark, I like to compare my results with a "Target Date Fund" (TDF) for my retirement year. For example if I'd put all my money in a Fidelity TDF back in 2019, I would have had gains of about +120%. If I'd thrown caution to the wind and gone "all in" on a fund like VOO, I could have had +170% gains since 2019.

Immediate-Run-7085

Just because there’s no match doesn’t mean you have to buy into a TDF. Are there no total market or S&P funds to choose from?

jboy9622

Honestly for me since I’m invested in Vanguards TDF in my 403b I don’t mind it since my job doesn’t offer a match so I’ll just throw money into it and just forget about it. I’ll just focus mostly on my Roth IRA which is invested in VT and taxable that has VTI and VXUS.

nauticalmile

The TDF OP mentioned appears to be a CIT with a 0.075% ER, maybe a couple of basis points higher cost than DIY-ing an equivalent out of VTI/VXUS/BND? That’s a pretty negligible cost difference.

Peace_and_Rhythm

Yea, I'm not knocking TDF's, they are a decent way to invest in the market, but for greater growth, especially in your 20's and 30's, you can beat specific funds.

Peace_and_Rhythm

I started out in a Target Date Fund as a young investor, just doing OK. Survived the 1999-2000 dot-com era and that bust. Still doing OK until 2008, then almost decided to sell and get out. I had a conversation with a cousin of mine who worked for T. Rowe Price at the time. He suggested I exchange my TDF's into Blue Chip and Growth funds instead. I really didn't know what I was doing, but did it anyway. I went all in. This was March 1, 2009. We all know what happened after this. Pure luck, but I'm so glad I got out of TDF's, even though yes, they are a nice conservative investment.

KlicknKlack

How will the SpaceX/Nasdaq affect target date funds? Like do I need to be worried about my Vanguard TDF selection? Should I be worried I am about to lose a few years of gains due to this BS?

Ornery_Banana_6752

Im 53 and been packing away more than 30% of my income for several years. I had half my 401k in an S&P fund and recently moved it all to a TDF that is about 80% equities. As a whole,(minus real estate) my portfolio is now about 75% in equities. And only about 30k in individual stocks. As long as my employer stays afloat, which they have been for over 100 years, I will be retiring at 60 so, I need to take on a little less risk than I was, going forward(fingers crossed) Everyone is different though in the amount of risk they are willing to take on.

Bubbles_2025

That’s my concern is how will affect my TDF

CarnageAsada-

Yep I sure did I sold my TDF and bought FXAIX then went back to buying more FSPSX and bonds for the next dip.

Rare-Presentation600

Points A and B ignore how most 401(k)s actually work—through Target Date Funds. If the plan sponsor swaps the underlying TDF for one with a 15% private equity allocation, the employee is opted-in by default. It’s hard to call it a 'non-event' when the Safe Harbor rule effectively removes the right to sue for that lack of transparency.

Ornery_Banana_6752

Half my 401k was in the S&P and half in a TDF(2040) I just moved it all to the TDF I sold about 30k of VT in a brokerage at a 3.3% loss, as perhaps a tax loss harvesting move, and also to have more liquid $ That's all I've done ATM. I'm not sure I will do anything else.

RJ5R

i understand. but vanguard TDF is only 0.08 and i don't even have to do anything with it, ever.

RichardFlower7

Stick to VTI/VXUS don’t do a TDF…

Luxferro

Have you looked at the market? The only thing that would be preventing your investments from dropping right now would be the bond portion of your TDF...

GaylrdFocker

Congrats on ringing the bell. At least consolidate to 1 TDF instead of 3. It's not really surprise capital gains with a TDF. They rebalance yearly and have bonds so Short Term and Long Term gains are likely every December.

Adventurous_Elk_4039

It’s honesty not a ton of work, but honesty not a big deal to have some bonds via the TDF either, especially if there are long bear markets.  The more important thing is that you are consistently investing throughout you working lifetime.

moiax

I'm still pretty far out from retirement, but the research I'm doing is leading me to this. Kind of a TDF glide-path, but pulling from bonds first and letting the equity portion build up to allow for a much higher success rate.

Cruian

25 isn't late (where are people getting this idea?). To me, Fidelity would be my top pick (and is the one I use): * No minimum on mutual funds (unlike Vanguard that is $1,000 for TDF or $3,000 for general index ones), tied with Schwab. * Fractional ETF investing (broader than Vanguard, since Vanguard only offers it for their own funds; Schwab doesn't offer it at all) * Unlike Schwab, offers combined developed and emerging market international funds of their own (tied with Vanguard) * 24/7 customer service (I believe tied with Schwab, better than Vanguard) Before investing though, I would suggest reading through the /r/personalfinance Prime Directive: https://reddit.com/r/personalfinance/w/commontopics

CarnageAsada-

I have both a TDF and sp500 FXAIX 80% international 20% so I guess I’m the best of both worlds 😂

JackfruitCrazy51

If you were 20 something today, and chose a 2060 TDF, it would be in 91% stocks. I don't disagree that early in your life 100% VOO is smart(it's what I did when i turned 30). When you're 4 years away from retirement, you need to consider things like sequence risk. Older people could do a lot worse than a TDF. I tend to think they are a little conservative for my taste, so I usually choose one 10 years past my retirement date, so in my case 2040. My TDF was up 18.78% last year, which compares favorably to what VOO did last year.

RichardFlower7

TDFs are garbage if you were straight VOO over the last 30 years vs a TDF over the last 30 years you’d be off by 130% or more. In all the major crashes TDFs fell just as hard and in some cases took longer to recover. TDFs are the most moronic investment for anyone who even knows how to sign in to their retirement account and elect a new investment

JackfruitCrazy51

The first 7 years(in my 20's), I thought I was some kind of financial savant. I had a mix of about everything. At around 30, I went 100% S&P 500 for the next 20 years. I plan on retiring in 4 years, so I've backed off in the last few years. I have roughly 35% of my savings in safe ladder type investments. I also have a large percentage in TDF's, which do have international exposure, but this has only been in the last few years when I started concentrating on retirement. So no, but I wish I had during those first 7 years.

Thin_Ad_2182

Everyone is making this point but I do have a counterargument. I am in favor at taking SS at 62 though, just to be clear. Here's my argument: an 8% return is fairly high to assume over an 8 year period. It should be more like 5%. We cant and absolutely should not be investing the same way we invest with a 30 year horizon vs. an 8 year horizon, this is basic stuff. You could easily lose a third of it if you're 100% equities and expecting an 8% return over such a short time frame. What if the market crashes? Your expected 8% return becomes negative 8%. It should basically be in a TDF. Lol

bofoshow51

28. 61% US equities, 34% ex-US equities, 5% bonds. Balance is through a combo of TDF in 401k, VT in Roth IRA, and VOO + VXUS in brokerage.

jameshearttech

I'm 43. My 401K is TDF. It's currently 90% equities and 10% bonds. My wife is a few years younger with similar 401K. We have a taxable account, too, that I manage. The mix in the taxable varies. Currently we have 65% individual equities (US large caps), 10% bonds (5% long duration US treasuries and 5% mbs), 5% crypto, 5% metals, and 15% cash.

dami_starfruit

Stocks are not low risk, if you want low risk you need to look into bonds/treasuries or ETF like SGOV. If this is money that you don’t plan on using until retirement, you could look into a target date index fund (TDF) that auto rebalance toward bonds as you age.

AceTracer

I would stick to 100% of your money going into the TDF 2070. Set it and forget it.

QuiteAffable

Honestly, I know this is WSB, but you should consider talking to someone about a gambling addiction. I recommend you go 100% vanilla TDF or VT, you shouldn’t be making investment decisions until you get the gambling sorted out.

AceTracer

I think you were better off with the TDF, but you'll find out for yourself eventually. I made the same mistake and learned likewise.

Ok_Assignment4100

Sorry, I don't know how exactly Fidelity numbers are reflected, but perhaps those are numbers that reflect yesterday's markets -- my assumption. Since it took about a full business day for Fidelity to transfer/exchange funds from my Vanguard TDF 2065 to these new funds.

Ok_Assignment4100

Yeah. I just switched out of a TDF into index funds, so the daily swings show up more clearly now. Today was a down day (So far) across the market.

andybmcc

Stick with the TDF.  It has less than 10% bonds right now.  You tinkering and guessing will cause much more drag than a tiny bit of bonds.

therealjerseytom

How do you know a 2025 TDF is the best choice for her in the grand scheme of her total financial picture, needs, personal risk tolerance, etc.? Whose idea is any of this? Look, I get it; we all care about family and want the best for them, to be financially secure, etc. But it's not our place to decide what's best for someone else. Like I said, it's certainly a valid option if she wants to go self-directed. If she does, it's her responsibility to make those investment choices. By all means you can make her aware that there are management fees and she could eliminate those by going self-directed. At the same time, if she's perfectly happy with her current situation, that's a choice to respect too.

CryptoeKeeper

Most of my 401K is in FXAIX as well. It's better than my TDF option

Melodic_Reception_57

For me it comes down to the desire to ‘set and forget’ for people that choose a TDF. I haven’t dug into the specific holdings of the top TDFs but I’d imagine over the long run you’ll be just fine parking the majority of your long term funds in that fund. Could you generate a higher return putting your own mix together? Sure. Are the vast majority of people going to keep up with the rebalancing and research to do that over the next 20 to 30 years? No. So it comes down to what type of investor you want to be with this portfolio.

cdude

Depends on your strategy. Even the latest 2065 TDF is holding 38% is international stock, is that what you want? Everyone has their own strategy and risk tolerance. Some people holds zero international stock and some thinks the US is going down. No one knows what will happen. You need to research and make your own conclusion.

Slartibartfastthe2nd

are you limited to the mutual funds? if not, consider the ETF equivalents (or at least compare the expense ratios). but your approach is solid in my opinion. TDF's are too heavily tilted toward bonds too early. No need for shifting to any bond mix until you get within five or six years out.

GaylrdFocker

too much overlap. No reason to have S&P500 ETF, S&P500 mutual fund, and total US market mutual fund. And either do 100% target date fund or don't include it at all. It's in a Roth IRA so you can sell whenever you want without issue (as long as you don't remove the funds) Just consolidate to 100% TDF or a preferred US/Intl split with 2 mutual funds. You can keep BRK.B if you want but it's included in a Total Market Fund.

Finance-Idiot

Recommendations please for quality aggressive growth ETFs for our Roth accounts which will not be touched for at least 20 years. I’m behind on my investment journey for retirement. Due to financial ignorance and lack of access to a 401k most of my working life most of our savings had been on HYSA and CDs until recently. I’ve been educating myself for the last couple of years and have opened Roth IRA accounts for both me and my spouse and have maxed them out each year. During this time I finally had access to a 401k which also has a Roth option and have been trying to max that too. I have also opened a Fidelity brokerage account and have been DCAing the majority of our savings into VTI/VXUS leaving about 15% for the emergency fund (6 mo of expenses) and bonds (mostly treasury bills and intermediate bonds). The 401k has horrible options so I choose a TDF with a year that’s actually 10 years after I plan to retire so it can stay a little more aggressive in there for now. I’ve been doing FSKAX/FTIHX in the Roth IRAs but I just funded both accounts with the max for this year and now I’m thinking of putting that money in a higher risk/higher reward ETF since we don’t plan to touch these accounts until way into retirement. Right now the amount in the Roth accounts is about 5% of the whole portafolio so I think I can be a little more risky with it. Any recommendations? Or any critique on my reasoning? Thank you for your time.

999forever

Yes, that’s exactly what I did about a year ago. Was way over exposed to US equities and balanced it out, mostly by adjusting my 401k TDF and getting some specific ex-US funds and that blend is up 25+% in the past year.  I figured as my job is at least somewhat dependent on US stability and a functioning government I was already exposed plenty to the US economy whilw also having 90+ of my equities be based in the US was putting all my eggs in the one proverbial basket. 

Rich-Contribution-84

I used to check it around the first week of January as part of my rebalancing effort, but now I have the rebalancing automated once a quarter. That’s for my tax advantaged accounts. For my taxable brokerage, I check it quarterly because I don’t ever sell anything. I just shift my percentage of VTI and VXUS that I’m buying to keep me close to 70/30 overall. My 401(k) and HSA are in a TDF so I don’t check anything. As far as like just peaking at the S&P 500 or world markets? I never purposefully check, but I’ll hear updates on NPR or see updates in the WSJ or whatever. I probably accidentally hear how the market is broadly doing nearly every day - but I never open the stock app or go look it up just to check, if that’s why you’re asking.

Cruian

* Is that including new contributions? If so, every contribution made lowers your lifetime returns because it starts at 0%. * When calculating for S&P 500, are you also accounting for your start date and (depending on the answer to bullet 1) any new contributions? * What would you do if the TDF starts pulling ahead thanks to market favor shifting to international for a long run? Recent history has been exceptionally kind to the US (especially large caps), but we've seen plenty of times where favor was outside the US and/or with smaller US companies, which S&P 500 doesn't touch but the TDF does.

harrison_wintergreen

> returns for the past 8 years are only 12%. that's not terrible. where did you get the idea 12% a year is bad? I'd leave it alone in the TDF, or a similar allocation. the S&P 500 is dominated by a handful of mega-large US companies, but there are periods of time international stocks or smaller company US stocks will perform better than the S&P 500. even bonds beat the S&P 500 something like 15% of 10-year periods. > too late to take a more aggressive approach and just switch to S&P500 at current stock market valuations, I'd hesitate to invest 100% into the S&P 500. in fact, with the CAPE ratio over 40 for the S&P 500 it wouldn't be a shock for bonds to beat the S&P 500 until 2035 or 2040.

Mootaya

Early 30’s, 401k, Roth IRA, and HSA will be maxed by EOY. Retirement money is all in TDF’s or Index’s.

leaning_on_a_wheel

Vanguard 2030 TDF 1yr +12.62% Vanguard 2060 TDF 1yr +20.32%

gizmole

TDF are usually conservative. If you want less bonds, you can also choose the 2075 TDF.

cjorgensen

The target date fund is already going to be skewed toward VOO. You should either do the TDF or make your own mix of break market and international. But mixing a target date fund with other ETFs kind of defeats the purpose of a TDF. Just TDF and forget everything.

ThatSpicyMeal

My old 2060 TDF was already 6 percent bonds. Not worth imo.

AviPaz

If your Roth IRA and taxable are already basically all S&P 500, keeping the 401k in a target date fund is actually a solid way to diversify without overthinking it. One year of outperformance means nothing though. The real questions are fees and what the fund actually holds. If the TDF is low cost and broadly diversified, it is doing its job. Going 100 percent S&P in the 401k would basically concentrate you even more into US large cap growth. Rebalancing Let the 401k do it automatically. Either turn on auto rebalancing quarterly or semi annually, or just rebalance once a year. The biggest win is consistency, not perfect timing.

djryan13

Just pick a fund that is years later… plan to retire in 2030 but I picked 2050 fund. I do have other funds too but most of my money is now in a cheaper TDF.

Machine8851

I wouldn't do a TDF because of the bonds.

OkChange9119

Agree. Part of the answer depends on the fee structure and/or share class of the TDF vs S&P500 index your employer offers in the 401k. And whether you invest outside of your 401k in an IRA or brokerage account. Also, different asset classes tend to have staggered years of under-performance and out-performance. Several years ago, it was mid and small cap US stock leading and, before that, it was real estate REITs. International stocks had lagged US markets in terms of returns for like a decade. https://www.visualcapitalist.com/how-major-asset-classes-have-performed-since-2020/

OkChange9119

Agree. Part of the answer depends on the fee structure and/or share class of the TDF vs S&P500 index your employer offers in the 401k. And whether you invest outside of your 401k in an IRA or brokerage account. Also, different asset classes tend to have staggered years of under-performance and out-performance. Several years ago, it was mid and small cap US stock leading and, before that, it was real estate REITs.

_galaga_

A lot of 401ks don’t have great options so a TDF is decent but you don’t need the bonds right now. Most would probably swap the bond chunk out for ex-US if that was an option. If you’re stuck with a TDF you could look to push the date out and see if that cuts the bond mix down further.

Adventurous_Elk_4039

There are various strategies but it all comes down to expense ratios and how much work you want to put into it. The TDF likely shows better because international outperformed last year. Personally, I like “owning the market” for instances just like that, so I would never recommend someone only hold the S&P 500. That said, depending on your 401k offerings, do you have any total market funds, total international funds, of if you have an S&P 500, do you also have mid cap and small cap index funds available? If not, it might just be easier to keep the TDF.

DaemonTargaryen2024

I was responding to your OP which called out the last 10 years. Either way, you are correct that a TDF can generally be expected to underperform an all-stock portfolio in the long run. It serves a different purpose and different audience

foradil

>You’re also (inadvertently) cherry-picking data. There have been 10 year periods where VTI has underperformed a TDF. Picking the last 20 years is not cherry-picking. Prior to that, there were few retail investors, ETFs were not mainstream, and 401k's were less utilized.

DaemonTargaryen2024

> I understand that target date fund should be providing a diversified, age-appropriate portfolio that gets more conservative over time. Yes. It’s a Honda civic. > I naively assumed they would not get particularly conservative until 10-20 years pre-target-date. Did you not read the prospectus? Or any of the publicly available data about the pre-planned lifecycle of the fund? > The 10-year returns for the 2060 fund is 201% versus 284% for VTI. You are comparing apples and oranges. TDFs never claim to compete with an all-stock fund in terms of performance. You’re also (inadvertently) cherry-picking data. There have been 10 year periods where VTI has underperformed a TDF. You can still generally expect VTI to outperform long term, but only looking at the last 10 years where there was a substantial US bull market is not a complete analysis. > Is the target date fund more stable or safer? Generally, yes. > How does this make sense? Answer this: who is the target audience for TDFs? And does you not being their target audience mean the TDFs are therefore useless?

StatisticalMan

Comparing VTI to a target date fund is apples to oranges. Compare a VTI+VXUS+bonds to a TDF.

dudreddit

The OP does not understand how TD funds work ... and 201% vice 284% for VTI should be considered quite good, for a TDF!

Pale_Drink4455

I have been saying this for years and the Bogleheads cultists hate what I had to say. I’ve been in purely the S&P for many years and my return has been close to 16% for the past 10 years alone in my retirement accounts. My brother in law who was stubborn to just stick with TDF and had a starting similar balance of mine since 2016 produced just under 11% over ten years. The ending balances between him and me are substantial with similar contributions!! Plus his expense ratios have been higher than mine to boot!

phil-l

Try it yourself! You can look up the performance for the 4 funds that make up this Vanguard TDF. Looking quickly 5 years back (mostly because that was easy to find): No surprise, the Vanguard Total Stock Market fund is way up, and the International Stock fund is up - but not as much. The Total Bond fund looks to be close to the inflation rate, but the International Bond fund has been down over the past 5 years. Yeah, you can't really compare this collection of funds to a pure US stock fund, particularly over the past two decades. They're trying to do different things.

er824

Honestly, if the expense ratio is reasonable there is nothing wrong with a TDF. I had that exclusively in my 401k for about 12 years. Only switched it because my employer refused to add the index fund flavors and I got tired of paying the expense ratio of the ones they did offer.

Odd-Flower2744

The idea that there are institutional investors scheming together with retail investors in mind has always been pretty absurd to me. All of retail together doesn’t move the market huge amounts and a big chunk of that group isn’t trading so there’s nothing to fool them with, their money comes out of paycheck into their TDF or whatever regardless. In summary you have retail making up a decent but smaller portion of the market then a huge portion of that being passive investors and what you’re left with is a pool of money so small it’s a no factor and even further this small fraction isn’t all betting in the same direction.

RangerNo5619

So you would opt for a full send into SPY over an asset allocation into a traditional TDF (target date retirement fund)? Btw, your return on investment over the past 14 years is beyond impressive. I’m tempted to do the same thing, but if we experience a depression in the next 15 years, I’m screwed.

Shiz_in_my_pants

Do you have an sp500/total US market/TDF fund? Congrats, you already have NVDA in your portfolio then.

Ill_Register9857

What about 37 and just started investing? Is TDF 2055 in 401k good? And what would you put in a Roth I just opened one too Thank you

Ill_Register9857

It’s with hsa bank there are many may etf and mutual funds and individual stocks to choose. I already have TDF 2055 in my 401k and Voo/schd in my Roth IRA. I shouldn’t need this money as I’ll have a fsa next year

c0LdFir3

What turd of a TDF do you have? Schwab, Fidelity, and Vanguard all managed over 20% on their TDFs. I’d be dropping that thing and doing something else if I were you.

luke_530

Dude get out. This robinhood? Go to fidelity or vanguard and open a roth and get a TDF. Stop the gambling mindset. Slow and steady on this game. Only allocate a small percentage to Yolo shit

luke_530

You sir need a TDF in that roth

buckles66

I think TDF's are good for someone who who doesn't ever want to rebalance and is not as tolerant to risk. I personally don't have any bonds right now as I'm young (28yo) and have 30 ish years until I want to retire. I'd rather focus on growing it as much as possible now, even with more risk. Its all up to your personal risk tolerance. Another thing to keep in mind is TDF usually have slightly higher expense ratios so I would do some comparing and research on how they function before deciding if that is the direction you'd like to go. No matter what funds you pick though, consistency and time in the market is the most important thing.

Wah_Day

I'm 32 and just started a new job, that offers a pension, and a 457b account, and looking for some advice on how to best approach all of this, and also kind of a sanity check. I currently don't plan to retire early, so planning on whatever the new age goal is. I have an old "Retirement Account" and an ESOP from my previous employer, which equals about $250k combined. I also have a Roth IRA with $25k in it. The "Retirement Account" has both pre-tax and after-tax funds, not effected by Roth contributions limits. My current plan is as follows: * Currently putting 5.5% pre-tax into Pension, company is also contributing 5.5% * Currently putting 5% after tax into 457b account, 100% into a 2065 TDF. Auto increase 1% every year. * Build up 1-year emergency fund, currently 3-months. * Max out Roth IRA, and diversify a bit more. Currently 70% VTI/30% VXUS, thinking of moving into 40% VTI, 32% VXUS, 20% BND, and 8% VNQ * Roll over ESOP account into a tax deferred account, IRA * Withdraw the full after-tax portion from the "Retirement Account" and roll that portion into the Roth IRA, the gains would roll over into the tax deferred account mentioned above. * Leave pre-tax alone, and let it grow. Diversified into Large, Mid, Small cap * Build a small vacation fund, $2,500 * Start building an investment account, no idea on what to invest in just yet. With all that said, does all this make sense and look like a good path to retirement? Are things I should reevaluate? Never though about having a pension so it is kind of making me rethink how to handle/approach retirement.

Ok-Repeat-2334

One big "catch" is that the finance industry makes far less money off passive index funds, especially in the past decade or so, since management fees on things like VOO have collapsed down to below 0.1% (So if you have 1 million invested, the company running your fund gets <$1000 dollars per year to run it, which isn't even pure profit because they need to use that money to do things like keeping the fund balanced to the index). This is why Wall Street pays for a lot of articles fearmongering against passive investing, arguments from which you will see repeated here despite the fact that they don't make sense. One common one is that there must be a "passive bubble" forming due to the % of assets that are held in passive index funds. There is a kernel of truth here, in that yes it makes sense that passive demand based on "being on the index" creates price distortion, but the "there is therefore a bubble that hasn't been corrected for" part is the lie. It relies on removing the following facts from the discussion: 1) Price discovery (ie, the process by which market actions establish a consensus price that we consider accurate) is accomplished by the act of trading, not the act of holding. You'll often see scare quotes like "90% of stocks are now held in passive funds", but this doesn't actually matter if the remaining 10% are traded with sufficient frequency to achieve price discovery. And we have more trading volume than ever. 2) If these distortions in the market ever grew large enough that active investing managers became reliably able to exploit them enough to beat the market on average, the problem would immediately self-correct. We would reach a sort of inflection point where it was totally balanced whether the "next" person with money to invest took an average of 8% per year passively and paid 1% fees (so 7.9% returns), or invested in an active fund which makes 9% returns but charges a 1.1% fee. If you choose the active fund, the increased demand would justify them now charging 1.10000001%, and suddenly the next marginal dollar is better spent passively. Obviously it's impossible to ever really know this kind of thing with this level of instant granularity, and the mechanisms by which the market self-corrects are a bit more complicated, but the larger pattern holds, and we can say with absolute certainty that active investors do not currently beat the market on average, even before you consider their higher fees. Remember, "active investing" isn't just guys going "buy! sell!", it also includes algorithmic trading, and the most simple algorithms cost pennies to run. It's trivially easy to create a script that says "Buy the S&P500, unless the P/E ratio of #1-500 exceeds the P/E ratio of #501-1000 by x%, in which case, sell the S&P500 and buy those instead", which would self-correct for the above. There's all sorts of algorithms like this, and infinitely more complex, currently at work in the system. So, given all this, the more interesting question is why so many people are just leaving money on the table. Like at my work we have a sort of "captive" pension system where you can choose which funds your investments go into, all of which have higher fees than on the open market, but never to such a degree that it's worth rejecting the system and losing out on our pension-matching. There is an S&P500 fund at 0.4%, and a Target Date Fund at 1%, which is just composed of a mix of the lower-fee funds available to you. You can see at any time what the % of those funds are, and if you are in the TDF, at any time you can break it up and buy the components of it directly. When you're a new hire, you actually lose more in fees than it invests in bonds for you, because the allocation is so low. And obviously, the TDF is the default they assign all your investments to unless you log in and tell it to do otherwise. For the life of me, I cannot get my fellow colleagues, even highly paid engineers who should be able to understand this stuff, to accept that they should log into the system, spend half an hour a year replicating the makeup of the TDF fund with its compnents, and save thousands of dollars a year. They still "feel safer not touching it". This kind of behaviour from humans is the real distortion in the market you should be wary of, which is how active investors continue to stay in business despite worse performance year after year. Even the illusion of someone else "taking care of your money" for you is enough for retail investors to set their money on fire. And so, those of us who choose to shrug off that false comfort, get better returns.

greytoc

I may have misunderstood your goal. You mentioned "let them do the allocation shift" so I took that to mean that you wanted the allocation to be moved slowly over time. And yes - the TDF would have a higher allocation of fixed income. Re - the manual process that I've used is primarily to move into fixed income slowly over time - but I have liked using target maturity fixed income funds so that I can control the average duration and credit quality. That probably works for me because I trade actively. Re: SWAGX - yeah - I think that's fine depending on your duration needs. It's intermediate duration.

el_smurfo

I assume the TDF will have a high allocation of fixed income which is my goal. What would your manual proposal be just shift the majority of the total market to Schwab's bond fund, SWAGX?

greytoc

That's fine. But you would need to check the tdf allocation as of now - a TDF with a 1-2 year target may already have a high allocation of fixed income. It's really also about your own personal risk tolerance - I personally would use a more manual process. Mostly because I like to be in control. But it depends on how much effort you want to expend into doing the re-allocation.