What do people think of Targeted Employee Retirement Funds Instead of 2/3 Funds Schemes?

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MrCheapo
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What do people think of Targeted Employee Retirement Funds Instead of 2/3 Funds Schemes?

Post by MrCheapo »

Hi

Those of us in larger corporations have access to targeted retirement funds for our 403B and 457B funds.

A fund looks like this https://myucretirement.com/Managed/Asse ... 202050.pdf

They are rather odd because its targeted for 2050-2055

Thoughts on the quality of these targeted funds vs the 2/3 Fund schemes people suggest here?

Can one roll over to other funds for 403B and 457H?
Last edited by MrCheapo on Mon May 03, 2021 9:38 am, edited 2 times in total.
pkcrafter
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Re: What do people think of Fidelity's Targeted Employee Retirement Funds for 403B and 457B?

Post by pkcrafter »

The link leads to a UC Pathway fund..........?



Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
terran
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Re: What do people think of Fidelity's Targeted Employee Retirement Funds for 403B and 457B?

Post by terran »

While this may be held at Fidelity it doesn't appear to be a Fidelity fund, but rather a State Street Advisors fund. That said, it looks pretty similar to target date index funds offered by companies like Fidelity and Vanguard and has an expense ratio on the lower end of such funds. I would have no concerns about investing in a fund like this, and probably would do so as it's pretty close to my desired asset allocation. The only reason I might not is if I wanted to use the 403(b) to fill out my asset allocation with things I might not want to hold in another account (like avoiding bonds in a taxable account, for example).
Topic Author
MrCheapo
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Re: What do people think of Targeted Employee Retirement Funds vs 2/3 Fund strategies for 403B and 457B?

Post by MrCheapo »

MrCheapo wrote: Sun May 02, 2021 8:02 pm Hi

Those of us in larger corporations have access to Fidelity targeted retirement funds for our 403B and 457B funds.

A fund looks like this https://myucretirement.com/Managed/Asse ... 202050.pdf

They are rather odd because its targeted for 2050-2055

Thoughts on the quality of Fidelity's funds?

Can one roll over to other funds for 403B and 457H?
sycamore
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Re: What do people think of Targeted Employee Retirement Funds Instead of 2/3 Funds Schemes?

Post by sycamore »

MrCheapo wrote: Sun May 02, 2021 8:02 pm Hi

Those of us in larger corporations have access to targeted retirement funds for our 403B and 457B funds.

A fund looks like this https://myucretirement.com/Managed/Asse ... 202050.pdf

They are rather odd because its targeted for 2050-2055

Thoughts on the quality of these targeted funds vs the 2/3 Fund schemes people suggest here?

Can one roll over to other funds for 403B and 457H?
"Target Date" funds can be a great choice for many investors:
- They provide diversification benefit by using a reasonable mix of stocks and bonds (including US & international stocks, and sometimes bonds), which some investors might not otherwise use.
- They rebalance to the target asset allocation automatically.
- They are usually low-cost although not the very lowest cost compared to the 2/3-fund approach.
- They are hands-off. A less-interested or less-informed investor can get a very good portfolio without having to climb a steep learning curve.

They're not perfect. Some investors don't like that TD funds include international bonds, some don't like the glide path, etc. But for many they can be an ideal choice nonetheless.

Read more about Target Date funds here.

If you planned to retire in 2050, the 2050-2055 fund might be just the right one and would be a very good default choice, but I'd rather first determine my risk tolerance and target asset allocation, and then pick a TD fund to match.
pkcrafter
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Re: What do people think of Targeted Employee Retirement Funds Instead of 2/3 Funds Schemes?

Post by pkcrafter »

MrCheapo wrote: Sun May 02, 2021 8:02 pm Hi

Those of us in larger corporations have access to targeted retirement funds for our 403B and 457B funds.

A fund looks like this https://myucretirement.com/Managed/Asse ... 202050.pdf

They are rather odd because its targeted for 2050-2055

Thoughts on the quality of these targeted funds vs the 2/3 Fund schemes people suggest here?

Can one roll over to other funds for 403B and 457H?
These target date funds hold total stock market, international, emerging markets, and real estate, with a touch of commodities. They are very good funds with low expense ratios. Choose one by desired asset allocation, not date.

You may be able to roll to another plan provided by your company, and you can roll to other funds offered in the same plan as the target funds.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Doctor Rhythm
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Re: What do people think of Targeted Employee Retirement Funds Instead of 2/3 Funds Schemes?

Post by Doctor Rhythm »

Target date funds (TDF) are usually a solid option for anyone. Since you linked to the University of California retirement program, I‘ll point out UC made the age 65 TDF the default investment choice for their 403 and 457. So, if you don’t specify where you want your contributions invested, UC will put on it into the TDF that’s closest to the year you turn 65. I think they’re pretty good, especially if you want to be hands off.

Some things to point out about UC’s TDF’s:

— They’re not actually mutual funds that are traded publicly, but “communal investment trusts” that were created by State Street specifically for UC. That’s why you can’t just look up their ticker symbol.

— They are very low cost - typically 0.04% ER with no additional fees. That’s right at the bottom compared to other TDF.

— Their stock to bond ratio is fairly typical compare to other TDF’s - not the most aggressive or conservative. They do maintain something close to global market cap weight in terms of US-to-International stock. They have emerging market stocks at their global weight. For historical interest, these funds used to be much more conservative until being revamped several years ago.

— They do end up in a fairly conservative place with equity at 30% at retirement year + 5, when the glide path lands. This might be because many UC employees will also have a pension, so there is less need to grow the portfolio after retirement.

— Their bonds are almost all domestic (unlike Vanguard’s TDF which have a significant international bond holding). The bond holding has a longer duration though and a somewhat higher credit risk. You’ll also see that they include a a small amount of a “High Yield” fund in addition to the usual aggregate bond index fund. Good luck trying to learn anything about it.*

— It’s pretty much an index fund. The major holdings are all passive and closely track their benchmark.

— Many of the underlying funds are screened for ESG, but it doesn’t seem like a very stringent filter, as their market sector coverage is still close to that of other index funds. I other words, they’re not super tech heavy. Other than explicitly being “tobacco free”, I’m not sure what else is excluded.


*Perhaps my only gripe about the UC TDF is the opaqueness of some of their holdings.
Last edited by Doctor Rhythm on Mon May 03, 2021 1:39 pm, edited 3 times in total.
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neurosphere
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Re: What do people think of Targeted Employee Retirement Funds Instead of 2/3 Funds Schemes?

Post by neurosphere »

MrCheapo wrote: Sun May 02, 2021 8:02 pm
Thoughts on the quality of these targeted funds vs the 2/3 Fund schemes people suggest here?

Can one roll over to other funds for 403B and 457H?
I love Target Date type funds. So does Christine Benz at Morningstar (great read): https://www.morningstar.com/articles/10 ... date-funds

Edit to add: See my signature. :D
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".
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