In my latest vlog, I highlighted a Wall Street Journal article that asks an important question many investors overlook: Do you really know what’s inside your 401(k)? The piece explains how target-date funds—once a simple, “set it and forget it” retirement option—have become more complex, often including alternative investments and layered fee structures that aren’t always obvious.
Years ago, selecting a target-date fund that aligned with your financial plan was easy. Today, these funds may hold private equity or other alternatives that don’t necessarily match your intended asset allocation. While target-date funds can still be useful, they now require a more thoughtful review.
That’s why I believe in the philosophy of know what you own and know why you own it. Your 401(k) or 403(b) should align with your overall financial plan, including your long-term goals, risk tolerance, and asset allocation strategy. As part of your annual review, it’s important to bring in your employer-sponsored retirement statements so your investments can be evaluated in context. Volatility is part of investing, but having the right strategy, diversification, and rebalancing plan makes all the difference.
This ensures that:
Your asset allocation matches your financial plan
Your investments are diversified appropriately
Fees and fund structures are clearly understood
Because your 401(k) is often one of your largest lifetime assets, it’s essential to understand how it’s invested and what it’s costing you. I encourage you to read the full Wall Street Journal article to better understand how today’s target-date funds work—and to bring your retirement statements to your next review so we can ensure everything aligns with your plan.