Lazy Retirement Planning
Recently a friend of mine approached me about planning for retirement. My friend definitely knows that she’s got to do some planning, but her head is a bit in the clouds. Fortunately, she knows this about herself, and while she feels at a loss, I’m really proud of her for recognizing that she needs to take control of her future and have something for herself that is not in the control of her spouse.
She’s not a numbers person and she doesn’t want to think too much about it. The main thing I told her is that she will probably want to talk to an investment professional since she really does need professional grade advice and I’m not a professional. We’re close friends, but maybe not *this* close. Knowing that she is a regular saver when she has money, but has erratic income, I mentioned that she might like target retirement date funds from places like Vanguard or Fidelity.
Here is a listing of the target date retirement funds at Vanguard.
40 years from now is 2046, which is about my friend’s time horizon for retirement. So she’ll probably look at the fund for 2045. If she wants more risk, go with a fund targeted for a retirement date of 2050. If she wants to be more conservative, she ought to try the 2035 or 2040 funds.
Fidelity has some great retirement planning resources if you’re just starting to look at retirement planning. I highly recommend people take the risk tolerance quizzes so they realize just how much risk/loss they are willing to bear. (I am thinking of the newbie investor who Jonathan wrote about last week. He obviously can’t tolerate much risk.)
Fidelity also has target funds called Freedom Funds.
In the interest of full disclosure, I have had, or currently have a relationship with both of these firms, which is why I feel comfortable recommending them. I hear that T. Rowe Price has similar products, but I don’t know them and can’t say anything about them. I will say that I have never bought into any of these target funds because I run my own portfolio of mutual funds based on the risk I like to take on. If you want to know more, read about Modern Portfolio Theory, Jeremy Siegel’s work, and finally take a A Random Walk Down Wall Street. I’m no math smarty. I took AP Calculus and ended up with a D for the year. As long as you can understand the base concepts of risk, you can understand portfolio balancing. I promise I’ll write more on this.
Hey look! There’s a podcast! It’s from Vanguard, but the music isn’t nearly as nice as Scott’s over at Money Blogger Podcast. His is *WAY* better! And he probably doesn’t have nearly the same budget.
Single Ma wrote:
I guess I’m lazy then. My Roth is in a target fund.
Posted on 27-Jul-06 at 6:36 pm | Permalink