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Should You Use a Target Date Fund?

While setting aside savings for retirement presents a challenge to most household budgets, Amy Artiga shares that perhaps a more intimidating challenge is determining how to invest that money. After all, 1 in 5 Americans who aren’t invested in the stock market say it’s because they “don’t know enough.” WHAT IS A TARGET DATE FUND? Because of this, in 1994, a new kind of mutual fund was created: the target date fund (TDF). It is a kind of investment designed so that you can just put your money in and forget about it until it’s time to take your money out. You will recognize them because they have a future date in their name. Examples of two such funds on the BMA Investment Menu are American Funds 2025 Target Date or Guidestone MyDestination 2025. With a TDF, you get a complete portfolio in one investment. Your money is invested in a bunch of different stocks and bonds so that you won’t really feel it if one or two of them don’t work out. You don’t have to worry about being diversified amongst several different funds, it does that already for you. Most people want safer investments as they near retirement. You don’t want to risk losing all your money right when you need it! A TDF automatically adjusts what it is invested in to get more conservative and less risky as the target retirement date approaches. They also do automatic rebalancing. That means that every year they make adjustments to maintain the ratio of stocks to bonds based on the level of risk they want. TDFs do a lot of what professional money managers do, it’s just automated and based on a desired retirement date instead of your personal situation. IS A TARGET DATE FUND RIGHT FOR YOU? Do you consider yourself a do-it-yourselfer? Do you enjoy learning about investments? Or does the mere thought make you want to run away screaming? If investing scares you or bores you, a TDF might be just the thing for you. Or, if you haven’t even started investing yet because it’s just too overwhelming, then sign up for the BMA retirement plan and invest in a TDF. We have solid investment options available from American Funds and from Guidestone. Investing has never been easier than it is right now with TDFs. Take advantage of it and get a jump start on your future funded ministry. You won’t regret it! Let us know how we can help you get started! Source: Have Questions? We are here to help you invest in the right fund to help you reach your goals, contact us today!

Steve Crawley, PhD BMA Financial Executive Director


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