The short answer
A target-date fund is a single fund that holds a mix of investments and changes that mix as the year in its name gets closer. You do not need a second person to pick funds inside it. You may still want advice on the savings rate, a rollover, Roth versus pre-tax, or the plan for withdrawals. Pay for that decision. An ongoing percent, only to hold the fund you already chose, is the arrangement to question.
The fund's own expense ratio is a separate cost. If an adviser also charges a percent, you pay both. Ask what work happens beyond the fund.
| The fund already does this | You may still need a person for this |
|---|
| A diversified mix in one ticker | How much you save this year |
| A shift toward bonds as the date nears | Whether to roll a 401(k), and what that costs |
| Rebalancing inside the fund | Roth versus pre-tax, in writing |
| A prospectus you can read | The withdrawal plan in the year you retire |
What to do
- Read the fund's one-page description from the plan or the fund company. Note the year in the name, the expense ratio, and whether the mix keeps changing after that year. You want those three facts before anyone proposes a replacement.
- Write the decision that is not inside the fund. If you cannot name one, you do not have a job for an adviser yet. Advisor vs doing it yourself is the stay or hire test.
- If the proposal is an ongoing percent, ask for the annual dollars and a list of work that is not "we own the target-date fund." A 1% quote on $400,000 is $4,000 this year. That is arithmetic of a 1% quote, not a typical fee. If the list is empty, the 1% page is the comparison.
- If the proposal is a rollover out of the plan, stop and write the costs of staying against the costs of moving. The fund being "boring" is not the comparison. 401(k) rollover adviser is.
- If you do want help, price a project: savings rate, the next rollover, or the withdrawal year. Hourly vs AUM keeps that bill from becoming a percent on the fund.
- If you hire anyone, the custodian or the plan still holds the shares. Confirm that on Item 9A if the money leaves the plan for an IRA.
What to look for on Best Investors
- Item 5G(2). Portfolio management for individuals is the service a firm checks when it wants to run the account. Ask whether "run" means replacing the target-date fund. Get the replacement list before you agree.
- Item 5E(1). A percent of assets on a one-fund account is the fee to put next to the fund's expense ratio. Both numbers belong in the email.
- The brochure's strategy. If the strategy is a model of many funds, ask why that model is better for you than the single fund, in costs and in the job it does. The answer should be specific to your account.
- Search only after the decision is named. A firm page does not answer "do I need anyone?" The decision list above does.
Common mistakes
- Paying a percent so someone can "watch" a fund that already states its mix in the prospectus.
- Replacing the fund with six funds that add up to a similar mix, plus an advice fee, without writing both cost totals.
- Ignoring the plan's match, loan rules, or stable-value option because a person outside the plan called the fund simple. Those features are not inside the ticker.
- Assuming every target-date series with the same year is the same fund. Expenses and the stock-bond path differ. Read the page for the fund you hold.
- Rolling to an IRA to get advice, then discovering the advice was the same fund in a more expensive wrapper.
Related questions
Is a target-date fund the same as a robo-advisor?
No. The fund is one product inside a plan or a brokerage account. A robo-advisor is an advisory program with its own Form ADV and its own fee. Either one can be a simple portfolio. Read the scope on financial advisor vs robo-advisor. Programs named there are examples, not a ranking.
What if my fund is inside a 401(k) and I am leaving the job?
That is a rollover question, not a fund-quality question. Write stay versus roll, including the cost of advice on the new account. Age 55 and net unrealized appreciation, if they apply, are on the rollover page, not something to skip because the fund feels easy.
Do I need advice on the savings rate?
You need a number you will actually defer. A planner can price that as a meeting. You can also compute a rate from the match and your monthly surplus. Hire if the household has more than one account and you keep guessing.
What about the year I start withdrawals?
The fund does not decide Social Security, taxes on each withdrawal, or a pension. That year is should I hire an advisor when I retire?. The fund can stay. The paycheck decisions are the new job.
Limits
This page does not review your fund or tell you to keep it. It is not investment or tax advice, and Best Investors is not the SEC.
Expense ratios change. Read the current fund page. The $4,000 figure is 1% of $400,000. It is not a typical advice fee. Form ADV, if you hire a firm, is what that firm filed. If our copy and IAPD disagree, use IAPD.
Sources
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