My current target retirement fund is primed for when I’m 65; I’m considering moving it to a target date 5 years earlier (I used to think I was gonna retire at age 65, but I realized that IRAs and 401k can be taken out at 59 1/2 yrs so now 60 is my goal). I kind of want to do this since target retirement funds are designed for this, but will this mean that the funds become conservative a bit faster and thus mean I lose out a bit more?
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Yes to both parts your final question. It will by design be more conservative as you will be retiring sooner. Since you understand this, you also understand your options: leave it and be a bit more aggressive or update the date and play it safer.
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I would think you would want to do the opposite. If you’re trying to retire earlier you probably want a more aggressive portfolio longer, not a safer one.
You can but you should look at the fund composition, 5 years is often not that big of a difference it’s likely basically the same
A target date fund isn’t magic. I’ve looked at detail at Vanguard target date funds.
* They all (that I’ve seen) invest 60% US, 40% international.
* Each different target date has a different ratio of Stock vs. Bond….the older you are, the more bonds they want you to have.
* They periodically readjust the fund to hold more in bonds, as they feel appropriate.
So yes, if you want to retire earlier, you can use a target (age 60) fund instead of target (age 65) fund. But if you do so, you actually hold more bonds and less stock, which perhaps not as aggressive as you want to be to retire “early.”
The theory is that stocks are more volatile, and bonds more stable; that the closer you get to retirement, the more you want in bonds and the less in stock — to preserve more in case of downturn.
Just do both. Keep the money in the one you have and buy into the other one also.
Don’t forget that Medicare eligibility begins at 65.
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