Hi all,
I am helping a friend do a roll-over tonight. She knows she needs to do something for retirement but is not very interested in investing; I think she wants to set it and forget it.
Some specifics:
1) age 33
2) funding source - I believe she has about 5k in an old employer account that is being assessed account fees.
3) Emergency fund - as far as I know, she doesn't have one
4) 401k / employer plan - none
5) Retirement date - 65 (unfortunately)
Since she has no emergency fund and the amount is not large (in terms of a tax hit - I doubt this will bump her into another bracket), I think a Roth IRA may be best choice.
Is it better to just put everything in Total Stock Market Index Fund (0.17% fee) or the appropriate Target Retirement fund (0.18% fee). Since the fees are the same, it comes down to risk. As this will also act as an emergency fund I am leaning towards the Target retirement fund.
Of course, if I find out she has 10K or more, than the expense ratio of the total stock admiral fund (0.05%) does make a difference and will lead to more thinking.
I plan on presenting these two - she'll need to make the choice herself - but what say you? Would I be shortchanging her account growth by recommending the Target fund?
edit - clarity