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Some years ago, the mutual fund industry realized that many investors wanted a turnkey investment vehicle, especially for smaller transactions. The solution was the target date fund, a slight variation on the basic asset allocation fund, but with a target retirement date driving the percentages allocated to stocks, bonds and cash.
The use of target date funds has exploded after the Pension Protection Act of 2006 allowed them to be used as a default option for 401(k) plan sponsors. The shift meant that instead of retirement savers investing in money market accounts as the default investment option upon enrollment into an employer-sponsored plan, they were automatically enrolled in the target date fund that matched their retirement dates.
I discussed target date funds with Dianne from Indiana, who is in the process of rolling over an old 401 (k) and with Kat, our first e-mailer from South Korea! Jill from NJ and Maria had similar questions about putting retirement money to work. The main take-away: be sure to drill down into the allocation of the fund and make sure it's consistent with your risk tolerance level.
On the investment front, we touched on REITs with Ben from NY (should he buy an individual security or a fund?) and addressed an e-mailer's desire to earn an 8 percent real return (after-inflation) on his retirement assets.
Jonathan from TX and Nick from Wisconsin are both trying to hatch a plan to aggressively pay down student loans, while investing for the future: what's the right balance? It may surprise you, but paying down debt may yield the highest return among your various investment options.
Margaret from Maryland would like to open an investment account of some kind for her 22-year-old grandson. More to the point, she wants to help provide him with basic financial education. I suggested my friend Jack Otter's book, "Worth It...Not Worth It".
We fielded real estate/refinancing questions from Linda, Michael and Melinda.
Here are web sites and resources mentioned in this week's show:
-- NAPFA: National Association of Personal Financial Advisors (fee-only advisors)
Thanks to everyone who participated and to Mark, the BEST producer in the world. If you have a financial question, there are lots of ways to contact us:
Call 855-411-JILL and we'll schedule time to get you on the show LIVE
Send an email: firstname.lastname@example.org
Tweet me: @jillonmoney
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