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Don't Invest in Target Date Retirement Funds Without Knowing These 3 Things

Many retirement investors have turned to target-date retirement funds to make investing easier. But before you rely on these funds, there are some things you need to know about them and whether target-date funds make sense for you.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at target-date retirement funds and presents three questions you should ask in assessing them. First, Dan urges you to find out how asset allocations change over the course of your lifetime. He also urges you to assess how risky the fund will be at various points. Second, take a look at the costs of your fund, with an eye toward finding out whether you pay an additional fee for management beyond what underlying fund investments charge. Finally, Dan recommends learning whether the target-date fund is actively managed, as tactical bets add another element to return and risk. Dan concludes that while target-date funds can be smart investments, you need to know the specifics of each fund available.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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