Refined Wealth Newsletter by Joe Ward

Read Time: 3 Minutes

Target Date Funds & Pensions Don't Mix

One of the most common mistakes I've seen after reviewing over 300 portfolios is the overuse of Target Date Funds.

It's not the worst mistake by any means, but I've met a lot of DIY investors using TDFs without understanding the full ramifications.

Here's a quick video detailing why I think they're wrong for most people, particularly if you've accumulated assets outside of your 401(k). Particularly, pensions. More in the video below.

​

TLDR: As the title suggests, Target Date Funds and pensions don't mix.

Here's why:

1. While you're working, your pension may already be serving the same role as the bond allocation in a TDF.
2. In retirement, having to sell pro-rata from both the stock and bond portions of your portfolio is not ideal during bear markets.
3. In my opinion, the glidepath of Target Date Funds is overly conservative. See below.

In my view, and many others, one shown below.

If your Refined Reserves (~5+ years of expenses) equates to a 50% or more bond position in your portfolio, it's worth reconsidering your retirement plan, spending, and reserves needed.

If you think this might resonate with a colleague or friend, please pass it along! And if you have any questions or follow-ups on the topic, whether one-off questions or ideas for future memo topics, please let me know.

Joe Ward, CFP®, RICP®, TPCP®

We're always here to listen and offer guidance when needed. If you'd like, feel free to book a quick call today.

If you're enjoying our content, please consider sharing it with friends.

​​​

​Visit Our Website​

​Update Account Details

​Unsubscribe From Emails​

​2429 Bissonnet St. Houston, TX 77005​