We’re Giving Away $50,000! Enter Now. See Official Rules




Contests and

Free Fun!

AARP Games - Play Now!

PROGRAMS & resources

Best Employers for Workers Over 50

Check out the winners list and latest news about this AARP recognition program.

Employer Resource Center

Attract and retain top talent in a changing workforce.

Your Own Business

Information for business owners, entrepreneurs and the self-employed.


Learn From the Experts

Sign up now for an upcoming webinar or find materials from a past session. 

Most Popular


Your Money

The Great Target-Date Debate

Can these funds protect you against loss, but give you the growth you need in retirement?

purse locked to pole

— Zack Seckler/Galery Stock

Michael Kay, a certified financial planner with Financial Focus in Livingston, N.J., says that one of the problems with the funds is that they improperly assume that all investors in a certain demographic have the same financial resources, risk tolerance, goals and objectives.

“The idea that unsophisticated investors are properly being served by following someone else’s rule of thumb is irresponsible,” he says, “and in most cases inappropriate.”

Robert Isbitts, chief investment advisers for Emerald Asset Advisors in Weston, Fla., also objects to putting retirement savings on autopilot. “Target-date funds don’t have the ability to adapt to changes in the broad financial market environment,” he says. “In retirement investing, like life, hurdles and surprises come at you, and you have to adapt.”

As Jonathan Shelon, a portfolio manager at Fidelity Freedom Fund, sees it, there’s a common misconception among investors that when a target-date fund reaches the date in its name, it will be composed entirely of safe investments. Some investment advisers say that their clients think that what they have in their account at that date is what they’ll have for the rest of their lives.

The need for growth in later years

But because people can expect to live 15 to 20 or more years after retirement, the fund needs to retain the potential for growth, Shelon says. It needs to have stocks, bonds and short-term investments for many more years before it reaches its most conservative mix of roughly 20 percent stocks.

Although no one size fits all in retirement investing, he said, there is a valid notion that “one size fits most.” That’s what target-date funds are designed to do. They may not be perfect, but for the bulk of people, their strategies are effective, Shelon maintains.

With a wide variety of target-date funds in the marketplace, says Kern of Charles Schwab, it’s important to choose the target asset allocation that matches your own tolerance for risk and your need to accumulate a retirement nest egg.

Target-date funds continue to have ups and downs in 2010. According to Morningstar, for the three months ending July 23 this year, they fell an average 5.6 percent. The Dow Jones industrial average was down about 7 percent in that period.

Sheryl Nance-Nash is a freelance writer specializing in personal finance. She lives in New York.

Topic Alerts

You can get weekly email alerts on the topics below. Just click “Follow.”

Manage Alerts


Please wait...

progress bar, please wait

Tell Us WhatYou Think

Please leave your comment below.


Jobs You Might Like

Discounts & Benefits

From companies that meet the high standards of service and quality set by AARP.

Member Benefits AT&T Wireless Cell Phone

Members save 10% on monthly usage charges on qualified AT&T wireless plans.

membership adt

Small business owners save 20% on new installation of any new ADT security system.

UPS Store membership discount aarp benefits

Members save 15% on eligible products/services and 5% on UPS shipping at The UPS Store®.

Member Benefits

Renew today! Members receive exclusive member benefits & affect social change.

Rewards for Good

Your Points Balance:

Learn More

Earn points for completing free online activities designed to enrich your life.

Find more ways to earn points

Redeem your points to save on merchandise, travel, and more.

Find more ways to redeem points


Advance your skills. Transform your career.

Explore your learning possibilities.