#Morningstar  #TargetDateFund #MutualFunds

These highly rated investments should appeal to investors who like active funds, passive funds, or both.

00:00 Introduction

00:49 American Funds Target Date Retirement RFITX

01:19 Fidelity Freedom Index FFOPX

01:46 T. Rowe Price Retirement Blend TBLLX

Megan Pacholok: It might be 2024, but investors have until April 15 to make an IRA contribution if they want that contribution to count for tax-year 2023. One question you might be facing is whether you should you consider a target-date fund for your IRA.

Target-date funds are a compelling option to be added to an IRA. The IRA provides a tax advantage for investors who are saving for retirement, while target-date funds allow those investors to have a more hands-off solution that they don’t really have to build, monitor, or rebalance because the portfolio manager is really taking care of those steps.

There are a variety of target-date funds to choose from, and today I’ll highlight three distinct series that earn a Morningstar Medalist Rating of Gold, indicating our analysts’ highest level of conviction.

First is the American Funds Target Retirement series. This series utilizes active funds as its underlying building blocks, most of which earn a Morningstar Medalist Rating of Gold or Silver, giving investors access to topnotch active management. It also benefits from an astute asset-allocation committee. The series has a large-cap bias and conservative bond portfolio which has helped mitigate market risk that comes with the series’ equity-heavy positioning.

Another series to consider is Fidelity Freedom Index, which is built exclusively with underlying passive index funds. An experienced trio of managers with robust resources behind them earned an upgrade to its People rating to High from Above Average, edging its overall Medalist Rating to Gold from Silver. They’ve built a simple and comprehensive series that comes at a low cost, further adding to its appeal.

Unlike the two series already mentioned, T. Rowe Price Retirement Blend provides a healthy balance of underlying active and passive funds rather than relying on one or the other. For example, they hold a passive core U.S. large-cap blend fund and complement it with active management focused on large-cap value and large-cap growth. The team’s exceptional industry expertise and the research-intensive process give us confidence that it will deliver compelling long-term results.

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Megan Pacholok

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When it comes to investing for retirement, target-date funds are a popular choice for many investors. These funds are specifically designed to adjust their asset allocation over time, becoming more conservative as the target retirement date approaches. This hands-off approach to investing makes target-date funds a convenient option for those looking to save for retirement without having to actively manage their investments.

If you are considering investing in a target-date fund for your Individual retirement account (IRA) in 2024, here are three great options to consider:

1. Vanguard Target Retirement Funds: One of the most popular target-date fund families, Vanguard offers a range of target-date funds that are designed to suit investors with varying retirement timelines. These funds have a low expense ratio, which means more of your money goes towards your investments rather than fees. Vanguard target-date funds also offer a diverse asset allocation that is automatically adjusted as you get closer to retirement.

2. Fidelity Freedom Funds: Fidelity is another reputable investment firm that offers a range of target-date funds under the Freedom Funds umbrella. These funds are known for their flexibility, allowing investors to choose from various target retirement dates to customize their investment strategy. Fidelity Freedom Funds also offer a mix of actively managed and passive investments, giving investors a well-rounded portfolio.

3. T. Rowe Price Retirement Funds: T. Rowe Price is a well-respected investment management firm that offers a range of target-date funds under the Retirement Funds series. These funds are known for their strong performance and low expense ratios, making them an attractive option for IRA investors. T. Rowe Price Retirement Funds offer a blend of domestic and international investments, providing investors with a diversified portfolio that can help mitigate risk.

Ultimately, the best target-date fund for your IRA in 2024 will depend on factors such as your risk tolerance, retirement timeline, and investment goals. It is important to carefully research and compare different target-date funds before making a decision, and consider consulting with a financial advisor for personalized investment advice. With the right target-date fund, you can set yourself up for a financially secure retirement in the future.