Target Date Funds:
An article by John Sullivan in the inaugural issue of “401k Specialist” discussed Target Date Funds (TDF).  The article is based on a panel discussion at the 2015 Morningstar Investment Conference.   Initially these funds were disappointing.  One area of concern related to asset-class diversification. The question was not just about the ratio of stocks to bonds.  The portion in domestic, foreign and alternative investments was also a concern.  Another area requiring improvement was how the mix of assets changed over time and during retirement.

TDFs have improved since their introduction. Three companies account for 70% of the assets in these funds.  At one point they accounted for 80%.  Only one firm had funds (3) in the highest 10 performing funds.  The other top performing TDF’s were from 2 other firms.

The greatest benefits of TDFs from my viewpoint is the improvement in investor behavior.   “Investors are using them well.  They don’t exhibit the typical behaviors of fear and greed with target date funds, and as a result stay the course and remain invested longer.”

Not all TDFs are the same.  You want one that is consistent with your situation and your plan.

Retirement Planning Calculators:
This is the subject of a Wall Street Journal article, “New Study Questions Retirement Planning Calculators’ Accuracy.” This article was update online Feb. 22, 2016.

The article discusses an academic study of 36 retirement planning calculators.  “… ‘in most cases, the available offerings are extremely misleading ‘ and generally not helpful to consumers trying to figure out if they will have enough money to cover their expenses for the rest of their lives.”

The study was based on “… a hypothetical couple in their late 50s earning $50,000 each and aiming to retire at ages 65 and 63.”  The calculators were described as “…free and low-cost…” The cause of the misleading results was the limited amount of information used by the calculators.

“…the researchers identified a list of more than 20 factors they believe should be included…”

Do not use the simplest calculator available.  Pick one that has many questions.  Also review the assumptions they are using.  All calculators are use assumptions.  Some assumptions to all calculators are: life expectancy, health, inflation rates, investment returns.  Other questions would include the amount of your current investments and amounts you are currently savings.