• Skip to primary navigation
  • Skip to main content
  • Skip to footer
Mullooly Asset Management

Mullooly Asset Management

Fiduciary Fee-Only Financial Planner | Investment Advisor in Wall, NJ

  • Our Fees
  • About us
  • Schedule a Meeting
Age-Based Funds

Age-Based Funds: What You Need to Know Before Investing

February 6, 2013 by Thomas Mullooly

https://media.blubrry.com/invest/p/content.blubrry.com/invest/Age_Based_Funds_podcast.mp3

Subscribe: RSS

In this week’s Mullooly Asset Management podcast Tom and Brendan discuss target retirement funds and age-based funds. Their discussion begins by discussing why clients nearing retirement typically do not want to deal with the stock market. When clients are going to retire in the near future, the risk and volatility associated with the stock market is something that makes them nervous. This is justifiable because we are talking about the money they will be living off of shortly.

On the same note, Tom and Brendan discuss how 529 accounts shouldn’t be all in stocks when a child is getting close to college age. When a child has reached 16 or 17 years of age it would certainly be wiser to be invested in more conservative options, such as short term bonds.

The discussion moves onward to the topic of these age-based funds that Tom gets a lot of questions about. Like 401k plans and 529 accounts, these funds are meant to help save for things like college and retirement. The biggest sellers of these plans are companies like Vanguard, Fidelity, and T. Rowe Price. Tom and Brendan dissected the T. Rowe Price objective and investing strategy for their age-based funds. On the surface it actually seems pretty good, and it promises to be more conservative over time.

These age-based funds are marketed as a “set it and forget it” type investment that will be there for you when you need it for retirement. However, a closer look at what the fund offers shows otherwise. The T. Rowe Price 2040 fund (meant for somebody looking to retire around 2040) is 90% invested in stocks, which is a good thing. They are mostly invested in large cap stocks though, which according to our point and figure charts is not where you want to currently be. This fund doesn’t actually involve any stocks though. It is what we call a fund “of funds”, which means it is a basket of other mutual funds. This is one example of why you need to understand what you are getting involved in before investing.

The main issue that we have with these age-based funds is that the T. Rowe Price 2010 fund (meant for somebody who retired in 2010) is still 51% invested in stocks. We find this to be a bit risky for somebody who is on the vergeAge-Based Funds of retirement. An example of how this could backfire happened in 2008. This 2010 T. Rowe Price fund lost 26% in 2008. Two years before its holders were set to retire it lost a quarter of its money!

There is a lot you should know before getting involved with any age-based fund, and listening to this week’s Mullooly Asset Management podcast is a great place to start!

Never miss a post...and we deliver!

newsletter mailman

Get our updates delivered right to your inbox. Sign up today!

Success! Now go and check your email to confirm your subscription.

There was an error submitting your subscription. Please try again.

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit

Filed Under: Podcasts, Retirement Planning Tagged With: Financial Planner

About Thomas Mullooly

Thomas Mullooly is owner and founder of Mullooly Asset Management, Inc. In 2002 Tom opened Mullooly Asset Management, a fee-only investment advisory firm. As an investment advisor, and not a broker, Tom works strictly for his clients. With the help of point and figure charting, Tom builds a realistic game plan for clients.

Footer

2052 NJ-35, Suite #203
Wall Township, NJ 07719
Phone: (732) 223-9000
Fax: (732) 223-9600
Email: support@mullooly.net

  • Privacy Policy
  • Disclosures and Legal Disclaimers

Useful Links

  • Contact Us
  • Client Login
  • Pay Bill Online
  • About us
  • Our Fees
Text Example

The information on this website and blog do not involve the rendering of personalized investment advice. A professional advisor should be consulted before implementing any of the options presented. None of the content contained in this website should be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

Follow Us

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

Resource Center

  • Videos
  • Podcasts
  • Blog

Copyright © 2021 · Design by :- Eliza Jack