Ask Terry Questions Target funds for Retirement Income?

Target funds for Retirement Income?

By Terry Savage on August 17, 2013 | Investments

Hi, I am 61 and semi-retired. I had money in dividend and income fund with fidelity and am considering moving that money to fidelity’s 2025 target fund. I seek to begin taking my required MRD once I turn 70 1/2 in 2023. Would any target fund be a reasonable option for me putting my money there and don’t touch it till then?

SAVAGE SAYS: Actually, I’m not in favor of that move, much preferring the dividend and interest fund. Check the assets of the Target Fund and its proposed “Glide Path” — which will determine the amout of equity exposure that you will have not only during the next decade, but at the end when, if you leave your money there, you will start withdrawing. My instincts –and we haven’t had experience with many Target funds during the withdrawal period — is that it might prove too volatile for you during the withdrawal period. Remember, this fund does not go to “cash” at 2025, just a mix of stocks, bonds,and other assets.

I would recommend, since you are at Fidelity, that you go through their Retirement Income modeling process (Monte Carlo modeling) to get their recommendations for both diversifying your investments –and planning for withdrawals that are likely to last your lifetime. The service is free if you have money with them, and they will look at all your retirement assets, including any pension and also Social Security. That is the only way you’ll get a good idea of the alternatives, and I’d be interested to see what they ercommend.



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