Target Date Funds: I Just Rebalanced My 401K For the Last Time! …maybe

(Want to know 401K basics? Please check out my post in the 10 Things series.)

I just moved my entire 401K balance (even the portion I had rolled over from my previous job) to one fund: the Schwab Managed Ret Trust 2040 Class III.  Yes, I sold out to the ease of the target date fund.  I’ll no longer need to bother with the investment mix inside my 401K (assuming the fund maintains a decent return).  Don’t think I won’t be following along.  You should always monitor your returns.  Here’s a blurb from Schwab about their target funds:

“Are you looking for a way to reach your retirement goals, but don’t have the time to actively manage your portfolio? Schwab Target Funds are four actively managed funds that adjust over time as you approach retirement and one that is designed to help you produce income and additional growth potential after you’ve retired.”

I also have 100% of my contributions now going into this fund.  Prior to this decision to move “all in” I had my account spread out between a couple of large and small cap funds, an international fund, and a small amount in bond funds.  It was essentially the same mix as my new target date fund offers just in many funds.  Here’s the new mix:

• Cash – 0%
• US Stocks – 73.2% (11% Small, 11% Mid, 51% Large) 
• Foreign Stocks – 18.3%
• Bonds – 8.5%
• Other – 0%

My expense ratiois 0.54% of fund assets.  Compared to other funds in Schwab’s offerings, this is pretty reasonable.  It also has a four out of five Overall Morningstar Rating (here’s what that means).  The goal of this particular fund is to:

“…provide total return for investors retiring in or near the year 2040 [can't wait!].  It’s designed to provide a single investment fund that automatically adjusts over time to meet the changing risk and return objectives of investors saving for retirement.”

Lastly, the funds performance over the past 1, 3, and 5 year periods are 13.74, 14.21, and 15.38, respectively.  All these are right up there or better than the benchmarks and category averages.  I’d be happy with those returns for the next 30 years!

Info/Opinions on Target Date Funds from the Blogosphere:

Not All Target-Date Funds Are Created Equal from All Financial Matters

Kiplinger Doesn’t Advocate Target Date Mutual Funds from Blueprint for Financial Prosperity

Target Retirement Mutual Funds: T. Rowe Price vs. Vanguard from My Money Blog

1. The End of the 401K Match and Random Thoughts on the 401k vs a Roth IRA
2. Roth IRA: Contribute to a Roth IRA up Until the Date You File Your Taxes
3. Leave Your Job? How to do a 401K Rollover to an IRA
4. How Good is Your 401K? Ask BrightScope
5. Roth IRA vs 401K: Which is Better?

Tagged as: 401K, invest, Retirement, savings