PODCAST: The Pros and Cons of Target Date Funds with Tony Drake
Subscribe FREE wherever you listen:
Apple Podcasts | Google Podcasts | Spotify | Overcast | RSS
Links and resources mentioned in this episode:
- Inheriting an Annuity? Here’s a Little-Known Way to Stretch Its Tax Benefits
- Retirement Ready Radio Show (Tony Drake podcast)
- Is a Target Date Fund Right for You?
- ICI.org: Target Date Funds Remain Popular Investment in 401(k) Plans
- The Disturbing Conflicts of Interest in Target Date Funds
- FINRA Fund Analyzer
Transcript:
David Muhlbaum: The idea of an investment vehicle that you can put money into and then cash out for your retirement or to pay for your kid's college has long been appealing. Target date funds, which aim to fit that niche, have been growing in popularity. But set and forget, well, it has its pitfalls. Certified financial planner Tony Drake has a few cautions about target date funds. Also, we'll field some listener questions on Roth IRAs and annuities. All coming up on this episode of Your Money’s Worth. Stick around.
David Muhlbaum: Welcome to Your Money’s Worth. I'm Kiplinger.com Senior Online Editor David Muhlbaum, joined by my co-host, Senior Editor Sandy Block. How are you doing, Sandy?
Sandy Block: Doing great, David.
David Muhlbaum: Cool. So, we have gotten some emails, and we love listener mail – when it's nice. Now for the first one, I'm not going to use her name. Not only because it wasn't 100% clear from the email address, but also because the question they posed had real dollar values attached to it and maybe ... well, I'll call her Jane Doe. Maybe Jane wouldn't want us hashing over how much she has in her emergency fund in Roth IRA or how old she is, but we'll need those facts.
Sandy Block: I'm sure Jane will appreciate your discretion, and I sure would. So what does she want to know? Was this related to our chat with Ed Slott about IRAs?
David Muhlbaum: Yeah, bingo. Well, Jane said she liked it, but she wanted to know basically if she could use her Roth IRA as a savings account of sorts. A place to stash money she might need access to in the relatively near term.
Sandy Block: So we're talking about an emergency fund here?
David Muhlbaum: Sort of. Now, she said she already has $10,000 in a credit union savings account as her emergency fund, and she said she directs anything above that to a mutual fund portfolio, which sounds fine and well. But she, and I'm quoting here, "Didn't realize the benefits of Roth accounts until recently, and I only have about $4,000 in it."
Sandy Block: I don't understand how Ed Slott, who thinks everyone should have a Roth IRA, failed to reach her.
David Muhlbaum: Yeah, I know, right? Anyway, so I can only presume that the amount in her Roth IRA is relatively low relative to the other things. Not only because she only recently discovered the miracle of the Roth IRA, but also, as we've discussed, money going into a Roth is after tax. So if you're converting a conventional IRA into a Roth or even making contributions, you've got taxes to cover, and it's a good idea to do these conversions a bit at a time. Now we're guessing at Jane's strategy, but also again, that also seems fine and well.
Right, and she may just not have converted anything. She might just be contributing and there's a
You’re reading a preview, subscribe to read more.
Start your free 30 days