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Ask Dave

Retirement Blend

What's the advantage for Marina that self-chosen funds have over blended ones?

QUESTION: Marina in California and her husband are debt-free. She learned she has a blended fund for retirement and wants to know if they should switch to self-chosen funds. She has $26,000 in there. Dave says blended funds are watched by someone else, which he does not recommend.

Dave's ANSWER: You should move the money into self-chosen funds. The problem with blended funds is not that they are blended, but they are going to change that and move it around based on your age and based on where they perceive you to be. You won't even realize it's happening. I want you to be a lot more intentional with your money and know where everything is and where everything is going from this point forward.

Those self-chosen funds make you look at them and say, "Those are my funds." Then later on you'll decide that you don't like a certain fund because it's not doing well anymore and move the money to another fund. The blended takes your eye off the ball. It's almost like you've got a babysitter for your money, so you're not watching your kids. That's the big problem with it.

Usually the blended funds won't do as well as you staying on top of your own selected funds and watching them yourself. There should not be a lot of fees inside your 401(k) as far as trading funds, especially if you stay with the same company that has your fund. They probably won't charge you a fee at all. You can certainly look into it and talk to your human resources people about it. They can explain it to you in detail.

If they can't, ask one of our Endorsed Local Providers.