Target Date Funds and High Taxes
b'with Ben Steverman, Reporter \\u2013 Bloomberg News
Target Date funds are catching on with investors; these are funds where an investor provides his retirement date and the fund automatically rebalances his portfolio allocation between stocks and bonds as he nears retirement date \\u2013 so investors themselves don\\u2019t have to worry about portfolio rebalancing over time. Target Date funds are simple and have a low structure but they really only work if all your retirement money is in target-date funds\\u2026 which is not the case for 62% of all holders - who mix and match them with other investments to \\u201cdiversify\\u201d and lose about 2% in performance compared to those who go all-in with target-date funds. So a mix-and-match approach changes your risk profile in ways that typically do not benefit your portfolio, and this 2% under-performance can significantly impact your portfolio over 20 to 30 years.
Switching gears - the Top 1% of all Americans earn close to $400,000 per year and include well-paid professionals, moderately successful small business owners, doctors, etc. \\u2013 but still feel financially insecure. Rich Americans think they pay too much in taxes but don\\u2019t get enough bang-for-their-buck on taxes paid because of sky-high college expenses, rising healthcare costs and the lack of benefits for higher income Americans. Taxes in other developed economies, notably in Europe, provide a financial safety net and tend to take care of healthcare, education expenses, etc., but Americans \\u2013 not just the wealthy \\u2013 have to really depend on their own savings for a decent retirement. So it\\u2019s imperative that we channel our savings well and have a strong nest for retirement.'