Target Date Funds - Page 2 of 2

Target Date Funds

says Roseen. Target date funds make the most sense within 401(k)s and similar tax-advantaged retirement plans, because they must periodically sell holdings to meet their goals, which can trigger frequent capital gains taxes.

But there is a caveat: As appropriate as the funds are for many hands-off investors, they may frustrate those seeking more latitude to manage taxes or take advantage of market conditions, says Richard Turnley III, a chartered retirement planning counselor and president of Atlanta Wealth Advisors Inc. “They’re a little bit too passive,” he says. “After all, the five years before you retire could be the best period in 50 years for equity markets.”