In the beginning of each year, with tax season fast approaching, consumers across
QDIAs are used when an employee is enrolled in a 401(k) plan and doesn’t make an investment selection on their own. Balanced funds create an assortment of investments for QDIAs that are intended to fit the group of employees as a whole, while target or lifecycle funds for QDIAs contain specific mixtures of investments targeted to an investor’s age or retirement date.
Target or lifecycle funds are becoming popular with retirement plans as default investments, and with many individual investors as well, according to
“Why the demand? In part, these types of funds have been positioned as no-brainer investments for those individuals without the time, inclination or knowledge to choose investments for themselves,” Hutchinson said. “When evaluating target, lifecycle, or one-size fits all investment vehicles, it’s important to ask the right questions and seek out the right answers.”
For most people, it will be helpful to seek guidance from a qualified investment professional, as a properly trained financial planner can help to custom tailor investment strategies.
Hutchinson Financial recommends asking the following four questions to get started with customizing investments to suit individual needs and goals:
1. How much money would it take to retire comfortably? Each individual should consider their age and their own vision of what they want in retirement.
2. How does the employer select the fund it is offering?
3. What happens to the 401(k) when transferring jobs? What happens to the target investment plan?
4. What are you paying for in a target fund?
Hutchinson says individuals should ask the right questions and seek the right answers, then make adjustments as necessary to keep retirement savings plans on track. In the end, the decision to use a target, lifestyle, or balanced fund in their employer’s retirement plan should be a deliberate one, rather than a choice by default.
To learn more about how to begin investing and planning for the future, please visit the extensive library of learning tools and resources available at http://www.hutchinsonfinancialinc.com.
About Hutchinson Financial
Hutchinson Financial, founded in 1988, is an Independent Registered Investment Advisory firm based in
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