Help with target date funds in 401k...

[Benny86]

My wife's 401k offers Ssga target date funds which have 0.28% expenses (is this good??) but only problem is her target retirement date is 2030 but they only have 2025 and 2035 funds, is there any problem with putting half in both 2025 and half in 2035? If not should I rebalance also...thanks

[Frankies Girl]

If the only expenses are .28%, then it is pretty good.

And I would just go for the further date out - 2035 - if you're a little more aggressive, and 2025 if you're a little more conservative and not worry about splitting the difference. They gradually will rebalance to be less stock and more bonds as the date nears, so 5 years isn't enough to really worry over in my opinion.

[Eric]

Is .28% good?  It could be.  But that depends on what other funds are offered.  If there are index funds with a .05% expense ratio, you may be able to approximate the target date funds with even lower fees.  Or if they're all managed funds with ERs over 1%, then those target date funds could be by far the best choice.

One caveat about the target date funds is that they pretty much assume a normal retirement age.  I have no idea how old you are, but if you're retiring 20 years earlier than normal, they may be overweight bonds (or at least they would be for my liking) so you might want to consider picking a fund with a date past your projected retirement.

[kmm]

That seems reasonable for a target date fund. Vanguard is lower (.18) but Fidelity is higher (.68).

According to Vanguard's site, the average expense ratio for similar funds is .46, so you're below that.

[Jack]

One caveat about the target date funds is that they pretty much assume a normal retirement age.  I have no idea how old you are, but if you're retiring 20 years earlier than normal, they may be overweight bonds (or at least they would be for my liking) so you might want to consider picking a fund with a date past your projected retirement.

IMO, if you're going to pick a target date fund then you should pick one with the "retirement year" similar to when you turn 65, even if you plan to actually retire much earlier. Because your post-retirement time horizon is so much longer than the normally-assumed 20-30 years, you need more growth potential.

Of course, I'm not convinced target date funds are appropriate for super-early retirement anyway. For a "fire-and-forget" one-fund portfolio, I'd consider something like VASGX (fixed ratio of 80% stocks/20% bonds).

[Benny86]

Here are the other funds guys:
Ssga S&P 500 index fund (0.21%)
Ssga Small/Mid cap index fund (0.24%)
Ssga International index fund (0.27%)
Ssga U.S Bond Index fund (0.22%)