A Simple Plan

Outlining an investment plan can be challenging: Today, individuals are responsible for building their own retirement accounts. This is a dramatic change from the past generation, who relied heavily on defined-benefit pension plans, which guaranteed income for life following retirement. Investors are faced with the challenge of making decisions on how much to save each month, how to allocate savings, and how to take disbursements in retirement. Fortunately, target-date funds offer a convenient solution to help simplify investing for the future.

Target-date funds, also known as lifecycle funds, have emerged as a popular investment option for individuals who may be unprepared or reluctant to make their own investing decisions. These funds provide a pre-built asset allocation strategy that automatically adjusts based on the participant’s age.

Target-date funds can make retirement planning easier: The image above illustrates three target-date fund categories with varying maturities. As time passes, each portfolio is adjusted to meet the needs and goals of investors. Target-date funds achieve this by continually adjusting the mix of stocks, bonds, cash, and other investments. These funds become more income oriented as they approach and pass a target date.

For example, an investor who plans to retire in 15 years might select a fund from the Target Date 2026–2030 category, which places a large amount of assets in domestic and international stocks. Similarly, an investor with a retirement horizon of three years may choose to invest in a fund from the Target Date 2016–2020 category, which offers a more conservative mix. Consult your financial advisor to learn about target-date funds that may be right for you based on your investment objectives and risk tolerance.

Diversification does not eliminate the risk of experiencing investment losses. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than bonds. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, liquidity risks, and differences in accounting and financial standards.

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