When you select a target-date retirement fund, you first find one with a name that contains the year closest to the year you plan to retire. The fund will invest your money in a mix of stocks and bonds that becomes more conservative as the target year nears. Eventually, your money is rolled into a retirement-income fund, which holds the final asset mix.
But fund families differ in when they move your money to the income fund. At American Century, assets are moved into the One Choice In Retirement Portfolio (symbol ARTOX) the year the fund hits its target date, a day that portfolio manager Rich Weiss calls "the riskiest in an investor's life." The American Century income fund holds 45% of its assets in stocks, compared with 31% for its average peer. The relatively high stock allotment explains One Choice's category-leading five-year return.
By contrast, Vanguard and Fidelity customers remain in their target-date funds for years after reaching the target date. At Vanguard, clients shift to Target Retirement Income (symbol VTINX) seven years after the target date. Fidelity waits 15 to 20 years before moving its customers to Freedom Index Income, which invests in index funds, or Fidelity Freedom Income, which holds actively managed funds. The Fidelity and Vanguard funds are more conservative than the American Century fund. Vanguard Income holds just 30% of its assets in stocks, and each of the two Fidelity funds holds 24% in stocks.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
-
What Is a Qualified Charitable Distribution (QCD)?Tax Breaks A QCD can lower your tax bill while meeting your charitable giving goals in retirement. Here’s how.
-
Embracing Generative AI for Financial SuccessGenerative AI has the potential to reshape how we approach learning about and managing our personal finances.
-
The 5 Best Actively Managed Fidelity Funds to Buy Nowmutual funds In a stock picker's market, it's sometimes best to leave the driving to the pros. These Fidelity funds provide investors solid active management at low costs.
-
The 12 Best Bear Market ETFs to Buy NowETFs Investors who are fearful about the more uncertainty in the new year can find plenty of protection among these bear market ETFs.
-
Don't Give Up on the Eurozonemutual funds As Europe’s economy (and stock markets) wobble, Janus Henderson European Focus Fund (HFETX) keeps its footing with a focus on large Europe-based multinationals.
-
Best Bond Funds to BuyInvesting for Income The best bond funds provide investors with income and stability – and are worthy additions to any well-balanced portfolio.
-
Vanguard Global ESG Select Stock Profits from ESG Leadersmutual funds Vanguard Global ESG Select Stock (VEIGX) favors firms with high standards for their businesses.
-
Kip ETF 20: What's In, What's Out and WhyKip ETF 20 The broad market has taken a major hit so far in 2022, sparking some tactical changes to Kiplinger's lineup of the best low-cost ETFs.
-
ETFs Are Now Mainstream. Here's Why They're So Appealing.Investing for Income ETFs offer investors broad diversification to their portfolios and at low costs to boot.
-
Do You Have Gun Stocks in Your Funds?ESG Investors looking to make changes amid gun violence can easily divest from gun stocks ... though it's trickier if they own them through funds.
