They are well-suited for hands-off investors who crave simplicity, but there may be drawbacks for others with more complex finances, advisors said.About 29% of assets in the average 401 plan were held in TDFs as of 2023, according to the Plan Sponsor Council of America, a trade group. That share is the largest of any fund category, and is up from 16% in 2014, according to PSCA data.
"Target funds have a place for some investors, but they certainly aren't and shouldn't be used for everyone," said Winnie Sun, managing partner of Sun Group Wealth Partners, based in Irvine, California, and a member of CNBC'sFinancial experts generally recommend investors de-risk their nest eggs as they age — typically by shifting from more aggressive holdings like stocks to more stable ones like bonds and cash.
They take important decisions like asset allocation and investment selection "wholly out of investors' hands," Benz wrote. "What if you're more conservative or instead prefer more growth, aggressive tech investing, or prefer to invest in socially responsible investments?" Sun said. "It is important that a person understands how much risk they are taking in their target-date fund," said Carolyn McClanahan, a certified financial planner and the founder of Life Planning Partners in Jacksonville, Florida.