Other Various Retirement Funds

Last updated: April 8, 2016

Mutual Funds

The Value of Mutual Funds

Mutual funds offer a combination of features that can be ideal for retirement investors.

  • They are especially well-suited for beginning investors who worry about their ability to select appropriate stocks or bonds and who could benefit most from professional management.

  • Even experienced investors and those with large portfolios can benefit from what mutual funds have to offer: instant diversification, automatic reinvestment of earnings and easy-to-monitor performance.

What is a Mutual Fund?

A mutual fund pools money from many investors and buys a portfolio of stocks, bonds, or a mix of both. Each mutual fund is designed to achieve a specific investment goal.

  • The fund might own a selection of well-established blue-chip stocks, small-company stocks, foreign stocks, stocks and bonds, or a host of other investment types or combinations.

  • Each fund’s goals and other details are spelled out in its prospectus—a helpful document you should read before investing.

Kinds of Mutual Funds

The categories used to describe mutual funds do a pretty good job of indicating the kinds of investments the funds make. To find the right funds for your retirement portfolio, concentrate on the fund types that match your objectives and risk tolerance.

  • For example, aggressive-growth funds take significant risk by purchasing shares of fast-growing companies, trading rapidly or engaging in other risky strategies;

  • International funds invest in shares of companies based outside the U.S.;

  • And Balanced funds balance their portfolios between stocks and bonds.

Because the rate of return on your money needs to at least keep up with the rate of inflation before and after you retire many investment professionals recommend that, you keep a significant amount of your retirement savings in stock funds. How much depends on how long you have until you retire and your appetite for risk.

Read more about Mutual Funds here.

Target Date Funds

What is a Target-Date Fund?

In recent years, a new, easier way to invest for retirement has emerged: target-date retirement funds. You pick a fund with a name that includes a year close to the year you plan to retire. As the date approaches, the fund automatically adjusts the proportions of the stocks and bonds in the portfolio. Your portfolio becomes more conservative and protects your nest egg.

Possible Dangers and Downsides

These all-in-one funds are designed as a turnkey investment option. In theory, you invest in a single, professionally managed fund and you end up with a well-diversified portfolio appropriate to your age and retirement timeline.

  • The theory was put to the test when many 2010 target-date funds, designed for investors nearing retirement, lost 30% or more during the 2007–09 bear market. While that performance was better than the 55% drop in Standard & Poor’s 500-stock index (a basket of stocks that is a widely followed benchmark of the overall U.S. stock market), it was cold comfort for workers forced to delay retirement or retirees who had to scale back their withdrawals to preserve their shrunken account balances.

Part of the problem with target-date funds is their name. The debate continues over whether the funds should be invested to the retirement date in the label or through a retirement that could last 20 or 30 years beyond that. Most target-date funds continue to invest for long-term growth well beyond the retirement date.

Despite these concerns, target-date funds play a large and growing role in retirement investing. If your retirement account represents the bulk of your investment portfolio and you’re looking for a fix-it-and-forget option, these funds may be right on target for you.

*The information on this page is credited to IPT and Kiplinger. Their original materials are made available by the Kansas Securities here.

This article is published on KansasMoney.gov. Find more information by contacting these state agencies: