For boomers, it's the retirement that never was-By Ilana Polyak

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Call it the retirement that never was. The oldest baby boomers are turning 69 years old this year, yet many are still working and have no plans to go anywhere.

In 1990 just 12.1 percent of workers were 65 and older; by 2010 more than 16 percent were, according to the Census Bureau. That number is likely to grow as more boomers move into the over-65 demographic.
Modern retirement calls for different rules, so it's no wonder that boomers are redefining retirement.

"To think that you can finance a 40-year retirement is mathematically impossible," said Catherine Collinson, president of the Transamerica Center for Retirement Studies. A Transmerica survey shows that almost two-thirds of baby boomer workers plan to stay on the job beyond age 65-or don't plan to retire at all. "Baby boomers do not envision not working," Collinson said.
People who are at least 65 can expect to live another 19 years, and those who make it to 75 should plan to live well into their 80s, reported the Centers for Disease Control. At the same time, the average account balance for workers in their 50s and 60s is less than $150,000, according to the Employee Benefits Research Institute.
Read More How to start your own business
"Unless you socked away a lot of money, retirement for many is just not going to be what we grew up believing retirement was," said certified financial planner Mark Singer, president of Safe Harbor Retirement Planning, author of "The 6 Secrets to a Happy Retirement" and himself a boomer, at age 60.
As a result of working longer, boomers are transforming not just retirement, but the workplace itself.
Working longer is the most obvious solution to the retirement savings problem. Among all of the options available to pre-retirees, it's the one that has the biggest impact on a nest egg, said Judith Ward, a senior financial planning with T. Rowe Price. Working three years longer and contributing 15 percent of income can grow a 401(k) by 22 percent; working five years more can increase savings by 39 percent. Combining more years of work with a bigger retirement-plan contribution (say, 25 percent) has an even more powerful impact.
Of course, not all boomers will be content to continue pounding out 40-hour weeks, said Kerry Hannon, a jobs expert with AARP and author of "Love Your Job: The New Rules for Career Happiness."
Read More Tips for job changers
Some will opt for phased retirement schemes, where they're able to cut back on their hours but still stay employed. Depending on the number of hours, they may be able to hold on to crucial health insurance and retirement-plan perks. Most important, however, is that even part-time work can keep boomers from tapping their nest eggs too soon.
However, employers may not be so quick to jump on the phased-retirement bandwagon. "The trend is happening so quickly that employment practices have simply not kept pace with the changing times," Collinson at Transamerica said.
There are some legal obstacles in switching from full-time to part-time work-specifically, how to account for insurance and pensions for part-time workers-noted Mark Schmit, executive director of the Society for Human Resource Management Foundation. What's more, these arrangements could be seen as unfair to younger workers. "They might be thinking, 'These older folks are getting a perk that the rest of the organization is not getting,'" he said.

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The oldest boomers turn 69 this year, yet many are not ready to quit the workforce-transforming not  …

 

Some industries, however, are more open to it, said Schmit, especially if they have a looming brain drain, as is the case in health care and mining. Phased retirement might give businesses time to accelerate their recruiting efforts while still benefiting from the talents of boomers.
Of course, staying in the workplace longer is not without glitches.
According to Dan Schawbel, founder of WorkplaceTrends.com, a research and advisory firm focusing on millennials in the workplace, every generation has a negative view of the generation that's coming up but a positive view of their elders'. "The younger generation is seen as more connected and they're cheaper to hire, so they're seen as a threat [by boomers]," he said.
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In SHRM's survey of human resource managers, more than a quarter reported some level of intergeneration conflict in their organizations.
Dress code is one area particularly fraught, with millennials advocating for casual dress and boomers insisting on business attire. "Millennials want you to appreciate what's coming out of your head, not the costume they're wearing," said Anne Donovan, a managing director and millennials expert at accounting giant PricewaterhouseCoopers.
Focusing on dress code might seem trivial, said Donovan, but it speaks to workplace culture. Businesses that cling to formal dress will continue to lose young talent to companies that do not, she said. Few would argue that the hoodie-wearing engineers in Silicon Valley aren't getting the job done.
Communication style, too, causes conflicts. "The technology divide is getting wider," said Schawbel at WorkplaceTrends.com. "[Younger people] don't use email; they're texting and using Snapchat, and voice mail's dead."
These issues come to a head in particular when millennials supervise workers 20 years or more their senior. "We're seeing more and more of that, and that's just life," said AARP's Hannon. Boomers lamenting this reality, she added, are just "going to have to get with the program."
To quell these conflicts, some companies have instituted reverse mentoring programs-pairing up boomers with younger workers who can help guide them in today's technology and communications.
At Pricewaterhouse Coopers, where 80 percent of workers belong to the millennial generation, boomers in the company's Atlanta office can get help with their technology questions through their millennial mentors. "What we've done is taken the stigma away for the boomers, and millennials want to have that interaction with leadership," Donovan said.
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Philips, the Dutch lighting company and a client of WorkplaceTrends.com, uses cross-generational teams of millennials who manage employees nearing retirement. "The millennials are learning from the baby boomers, but the baby boomers are also learning from the millennials," Schawbel said. 

Culled from CNBC

Japan inflation edges up as BOJ keeps policy unchanged-By Elaine Kurtenbach

Japan central bank keeps stimulus policy unchanged as prices edge higher , jobless rate falls

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In this Nov. 29, 2014 photo, an industrial zone is seen at night in Kawasaki, south of Tokyo. Japan's industrial production fell in March, 2015, but by less than forecast, casting doubt on expectations that the central bank will opt to expand its already lavish monetary stimulus. The government said Thursday, April 30, 2015 that industrial production fell 1.2 percent in March from a year earlier and 0.3 percent from the month before. (AP Photo/Eugene Hoshiko)

TOKYO (AP) -- Japan's core inflation rate edged up in March and unemployment eased slightly, according to data released Friday, offering glimmers of promise for the world's No. 3 economy as it struggles to get growth back on track after years of stagnation.
Though a decline in factory output and other key measures were less encouraging, the central bank kept its ultra-loose monetary policy unchanged in a policy meeting Thursday. Some investors and analysts expected additional stimulus to be announced.
The central bank governor, Haruhiko Kuroda, acknowledged that his target of 2 percent inflation, excluding the impact of an April 2014 increase in the sales tax to 8 percent from 5 percent, remains elusive. He said actual inflation is flat at 0 percent and it might take three years, instead of the two years he originally aimed for, to reach that goal.
Core inflation, excluding volatile food prices, ticked up to 2.2 percent in March from 2.0 percent in February, the government reported. It said that excluding both food and energy, the consumer price index rose 2.1 percent, compared with 2.0 percent in February.
The unemployment rate slipped to 3.4 percent in March from 3.5 percent the month before, matching the level last seen in December.
However, a survey of purchasing managers by Markit for April showed declines in both production and new orders, with the index dropping below the 50 level which differentiates expansion from contraction to 49.9.
The latest "data signaled worsening operating conditions in the Japanese manufacturing sector," Amy Brownbill, an economist at Markit, said in an analysis of the survey.
"Production contracted for the first time since July 2014, underpinned by a further decline in new orders. Meanwhile, growth in new export orders slowed to the weakest in the current 10-month sequence of expansion."
Data released Thursday showed industrial production fell 1.2 percent in March from a year earlier and 0.3 percent from the month before, a milder decline than the more than 2 percent drop many manufacturers and analysts had expected. But a further fall is forecast for April.
Prime Minister Shinzo Abe, on a U.S. tour, has sought to raise confidence in his government's economic recovery strategy, which hinges on lavish monetary easing, public works spending and longer-term reforms.
The policies have yielded mixed results, with share prices soaring and the value of the yen plunging thanks to massive injections of cash into the economy by the central bank through its purchases of bonds and other assets.
The economy fell into recession following the sales tax increase that broadsided demand. The Bank of Japan expanded its asset purchases in October to help counter the malaise, but growth has remained flat despite a mild recovery in exports.
Japan is still on track for a "moderate recovery," the central bank said in its latest assessment of the economic outlook. But it acknowledged a raft of uncertainties that could either support faster growth or drag it down, including weaker demand for Japan's exports to China and the U.S.
The U.S. economy expanded at a mere 0.2 percent pace in January-March, the slowest rate in a year, and China's economy has also slowed more than anticipated.
Economists point to sluggish corporate investment as a factor slowing U.S. growth. That is a problem shared by Japan as companies opt to invest overseas rather than in a shrinking home market where the population is declining and fast aging.

Wages have also failed to pick up significantly for most workers, whose incomes are not keeping up even with the modest inflation seen so far under Abe. That in turn has undermined consumer demand, sapping growth.

Culled from AP

The millennial and the Contributory pension schemes- Odunze Reginald C

Image credited to independent.co.uk

Who are the Millennial, according to Millennial Legacy, “Millennial are the generation born between 1982 and sometime in the early 2000’s. However, these boundaries aren’t set in stone. Some definitions have the Millennial Generation starting as early as 1978 and starting as late as 1985. Basically, if you are born a little earlier than 1982 and you consider yourself to be more Millennial than Generation X, that is your opinion. Or if you were born in or just after 1982 and you feel that you are more Gen X than a Millennial, the same applies. It is really up to the individuals born during the cusp years (late 1970’s to early-mid 1980’s) to decide which generation they feel a stronger connection to”

Continuing it stated that “The digital generation is providing some hope for the retirement crisis. After watching their parents suffer through two major financial bubbles and the weakest economic recovery on record, the majority of millennial are placing money aside for retirement — as long as they have a job.”

It has been argued the contribution pension scheme is the main thing as most countries around the globe are migrating from the Defined Benefit Scheme to the Defined contributory scheme.

For contributors retiring within the next 10 years, they will not understand the beauty of the scheme, but for the fresh graduate of 25 years who may be expected to be in the scheme for the next 35 years, either to retire at the age of 60 or 35 years of service. They will understand better.

By simple calculation, the first batch of millennial are expected to access their retirement benefit between the period 2039 and 2042. And the real millennials are expected to access their retirement benefit between 2050 and 2060. Will it be enough? Will it match the value of the bond of their predecessors?  This therefore calls for an individual’s calculation of the estimated pension pot based on your expected date of retirement.

In a recent forum in Lagos, the AGM , public sector, National Pension Commission,  Mr. Mamman  noted that those that are entering the service at this time will be more favored than those already in the service , this is in agreement with my earlier postulations titled “ Will the Millennial  be entitled to bond” which appeared in Reginald odunze.com, in the article Odunze noted that the Millennial will be better than the present contributors based on the contributory pension scheme.

A rough estimate of the schemes indicates that even with a contribution of (Ten Thousand Naira) 10,000.00 with a zero retirement savings balance, making an annual savings of 120,000 on 9 percent interest rate with 3 percent inflation rate with life expectancy of 87 will have = N=26,936,446.54 while with 30000 monthly with the same parameters will give =N=80,809,339.61 with a monthly pension of =N=236,387.60. That’s a whole lot of money bearing in mind that the industry average is almost 13 percent.

From the analysis above which I used the pension calculator to calculate, it all means that the Millennial are more favored with contributory  pension scheme than the defined benefit scheme.

The 50+ Worker: Talented, Vital, But Where's The Demand?-By Jim Emerman

Two studies released in the last two weeks characterize the value and strengths of older workers in the American economy — and decry their under use in the American workplace.

Last week, the Employee Benefit Research Institute (EBRI) released its 2015 Retirement Confidence Survey and found, among other things, that the percentage of people expecting to work past age 65 continues climbing, to an all-time peak.
Now, 36% say they expect to work beyond that age, with one in 10 planning never to retire. This is a threefold rise since 1991, when only 11% planned to work past 65. Today, a whopping 67% plan to work for pay in retirement. Yet the percentage of retirees actually working part-time continues to hover around 25% as it has since 1998; it was 23% this year.

The Work in Retirement Gap
That gap between people planning to work in retirement and those actually working is no mystery. As I told Anne Tergeson of The Wall Street Journal, employers have not yet embraced older adults with open arms.
This week, AARP released a study reprising and updating its 2005 report on the business case for hiring the 50+ worker. A Business Case for Workers Age 50+: A Look at the Value of Experience, prepared by Aon Hewitt (a talent, retirement and health-solutions firm), showed that the arguments for hiring experienced workers have grown stronger in just about every way over the past decade.

When combined with the latest report from the Society for Human Resources Management, which indicated that only about a third of their members were weighing policies and practices related to an aging workforce, AARP’s new study should serve as a jangling wake-up call to employers.

AARP’s strongest arguments are twofold:
First, contrary to conventional wisdom, older workers do not cost their employers significantly more than younger workers. Adding more 50+ talent to a workforce “results in only minimal increases in … labor costs,” AARP said. The incremental total compensation costs of retaining and recruiting more 50+ workers turned out to be between less than 1% and 2% in four industries: engineering, financial services, health care and retail.
Changes in compensation practices — moving from tenure- to performance-based compensation schemes, the decades-long shift from defined benefit to defined compensation retirement plans like 401(k)s and a slowing in the rate of health care insurance costs — mean that these days older workers are not particularly more costly to employ than their younger colleagues.
What’s more, seasoned workers are far less likely to leave jobs and projects unexpectedly than younger ones. Aon Hewitt’s database revealed that nearly half of employees under 50 say they would consider another job offer or are actively looking. In contrast, fewer than three in ten workers over 50 say they’re job-hunting or open to offers.
With the cost of unplanned turnovers running between $7,400 and $31,400 per employee, depending on the industry, greater stability translates into bottom-line security for companies with a higher census of mature workers.
Second, data from Aon Hewitt and Gallup indicate that workers who are 55+ are more engaged and motivated than younger workers. According to Aon Hewitt, 65% of 55+ workers are engaged, compared to 60% of workers overall. (The study defines engagement as consistently speaking positively about the employer, having an intense desire to be part of the organization and exerting an extra effort to contribute to business success.)

The study connects the dots between these qualities and a direct effect on business success: A 5% difference in engagement translates into a 3% increase in revenue, it noted.
Higher levels of engagement among older workers correlate to the extra-monetary values they derive from their jobs, including pride in their work, seeing a job as an important part of personal identity, continued personal growth and a feeling that there is still a lot to accomplish in their work.
The Dilemma Businesses Face
Interestingly, but perhaps not surprisingly, these are precisely the same extra-monetary values that Encore.org has identified as most present in those people seeking encore careers — those who plan to contribute to the greater good in their communities when they leave their current jobs.
All this raises an interesting dilemma for businesses that invest in mature workers: How should companies retain this talent and keep their levels of engagement high when many of these workers appear to be drawn to a next career that would offer them the opportunity to give back?
I’d point to the experience of Intel, which a few years ago gave all of its U.S.-based retirement-eligible employees the opportunity for a fully paid Encore Fellowship upon retirement. (The fellowship lets them explore opportunities in the nonprofit sector for the next stage of their careers.) Intel has found that the Encore benefit has kept those nearing retirement more engaged.
By showing that it understands and values mature talent, Intel has positioned itself as an employer of choice — improving its attractiveness to younger employees, allowing the company to retain older talent and managing retirements in line with the firm’s strategic needs.

But pioneering can be lonely work. Intel and a few other corporate innovators are riding the cutting edge of the encore movement, integrating the needs and assets of older workers even as they move into new forms of employment. Other firms seem far less aware of the opportunities mature workers represent or of the rising tide of experienced workers who seek to continue working into their 60s and beyond.

There’s a lot of valuable data collected in AARP’s new report, enough to make a pretty unshakable case for harnessing the talent of mature workers in the marketplace — and plenty of food for thought for employers.

Culled from Forbes.com

DEVELOPING SUCCESSFUL STRATEGIES FOR A HAPPY RETIREMENT-ODUNZE REGINALD

Image credited to telegraph.co.uk

In his book, “The Prince” a book on political philosophy, Machiavelli stated that the destination is far more important than the journey; he was so engrossed with it that he came up with a political maxim that still stands till today, “the end justifies the means”

And in the film Transcendence, a film on Artificial Intelligence, Dr Caster and his team noted that the journey is far more important than the destination.

But the views of financial and retirement planners are different; they believed that the journey is as important as the destination.  So is all aspect of life, the journey of any event, program, study is by far better than its destination. If the journey is well planned, the destination will be great, and if the journey is haphazard then its destination can be a dismal failure. Pension is not an exception.

In his books, “The magic of getting what you want”, and “The magic of thinking big Schwartz” noted that human beings and individuals expecting to make change in their immediate environment should be willing to prepare their 5 minutes obituary and by preparing their 5 minutes obituary, they will be able ascertain if they have achieve their expectations in life. So also should workers be able to prepare for their own retirement even when they are still working, by carrying out their pension calculations, they will be able to extrapolate in advance, their likely expected pension pot and their pension’s benefits. They will also be able to plan in advance how much they intend to make and collection as their lump sum and monthly pensions.

From these two illustrations, it can be observed that in every aspect of life careful planning, checks, measures are necessary for a better deal. Even in life, James Schwartz noted in preparing ones obituary, you will be able to ascertain what you have achieved at a particular age. In pension one should make it a duty to at one time or the other to ascertain what his or her pension pot is, bench mark it with your benefits, salaries , allowance accruable to you now, by so doing you will know whether you are making a headway or not in achieving the required pension pot. There is also need for a pension calculator.

There are steps to achieving that and according to Wall Street cheat sheet “TCRS offers the following three strategic steps for achieving retirement readiness and success:

1. Save for retirement. Start saving as early as possible — and as much as possible to maximize potential compounding of investments. Save consistently over time. Avoid taking loans and early withdrawals from retirement accounts as they can severely inhibit the growth of long-term retirement savings.
2. Calculate retirement savings needs, develop a retirement strategy, and write it down. In creating a plan, consider lifestyle, living expenses, healthcare needs, government benefits, and other factors, as well as a backup plan in case retirement comes early due to an unforeseen circumstance.
3. Get educated about retirement investing. Whether relying on the expertise of professional advisers or taking a more do-it-yourself approach, gain the knowledge to ask questions and make informed decisions. Seek assistance from a professional financial adviser, if needed.” (Wall street cheat sheet)”

But in having a worthwhile retirement is a basically a function of the strategies put in place in achieving that.  Strategies according to Anao are schemes, maneuvers, and methods, plans which organizations or individuals hope to deploy in order to function effectively, Retirement is essential one of the basic facts of life, and people save for two basic reasons, to make lots of money and to provide for the retirement. And according to a recent research, people are more likely save to cater for their retirement than to be rich.

The problem of financial crises and the increase in the working age in United Kingdom and the United states has made people to start planning heavily on the retirement, coupled with a recent development where scammers target retires because of their vulnerability indicate a positive trend in having a good retirement strategies as most whites return back to work having discovered that their pension pot could not carry them through during their retirement. These are the basic strategies for retirement:

1 Save for retirement: saving for retirement is a basic requirement in life especially in Africa where there is no social security. Saving for retirement in Africa is fast becoming important as the modernization has gradually eroded African system of social communism where in most communities; people gather together build houses for old people who do not have children to cater for them. As this has eroded, it becomes increasingly important to start saving for old age

2 Make s rough estimate of retirement savings needs, the saving need is a strategic issue as most retirees came to the sudden realization that what they are getting as their lump sum is not enough, coupled with their desire to get a house and a car from their lump sum which is barely enough to cater for their immediate needs.

3 Develop a retirement strategy, it is very important to fashion a well defined retirement strategy. Transamerica Center for Retirement Studies (TCRS), noted that in developing a retirement strategy, it is important to do the following “create a plan , In creating a plan, consider lifestyle, living expenses, healthcare needs, government benefits, and other factors, as well as a backup plan in case retirement comes early due to an unforeseen circumstance

4 Know a lot about retirement investment, it is the inability for contributors knowing about investment that often drove them to annuity. Contributors should at one time or the other gets investment advice from their pension fund administrators. They can do this by attending forum organized by the various Pension Fund Administrators to get adequate information on investment strategies

5 Maintain a positive attitude towards life and pension inclusive; according to book of job what people fear most always comes to them. And according to Robert Schuler, in his book , “the power of positive thinking “ he noted that  one of the basic ingredient of success is maintaining a positive outlook to life, believe that you will make and you will make it, believe that you will not , and you will definitely not”

Therefore maintaining a positive attitude in all aspect of life is pre requisite for all facets of life and Le Boeuf (1987:21) noted that “your world is a mirror and your mind is a magnet what you perceived in this world is largely a reflection of your own attitudes and beliefs. And life will give you what you attract with your thoughts. Think, act and talk negatively and your world will likely be negative. Think, act and talk with enthusiasm and you will attract positive results.

6 Do additional Voluntary Contribution: It is also important to embark on additional voluntary contribution as the mandatory provision of 15 percent is not quite enough and I strongly commend the Federal government of Nigeria for increasing to 18 percent.  Individuals should be willing to additional voluntary contributions, the gain of AVC far more outweigh its impediments, especially now the tax is on the revenue, and not in the principal, if you are withdrawing below 5 years.

Pension is a great destination, and it requires careful journey , which comprises planning, adequate contributions, monitoring pension pot and as you endeavor to that, you will discover like Dr Caster and his team that the journey is very important as its destination. 

Odunze Reginald C

Lead Consultant, Charge Consulting

Audit of Nigeria's NNPC shows it overpaid state, but still owes-By Felix Onuah

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Nigeria's President Goodluck Jonathan (C) and wife waves to people in the queue waiting to cast their …

By Felix Onuah

ABUJA (Reuters) - A forensic audit of Nigeria's state oil firm released on Monday said the company, accused of corruption, actually overpaid the state by almost $750 million, but should still pay it an additional $1.5 billion.
Outgoing Nigerian President Goodluck Jonathan released the audit days after his elected replacement, Muhammadu Buhari, pledged to issue the report and crack down on corruption in the energy company once in office.
The probe of Nigeria National Petroleum Corporation's (NNPC) books was instituted last year after former central bank governor Lamido Sanusi said the firm had withheld $20 billion in oil revenue from government coffers, jeopardising the country's finances.
Details in the PriceWaterhouseCoopers audit said NNPC actually overpaid by $0.74 billion in the period between January 2012 to July 2013, after remitting $50.81 billion to federation accounts of the $69.34 billion it had received.
The balance of $18.53 billion was accounted for through various operational costs, unremitted revenues by a subsidiary and gasoline and kerosene subsidies, it said.
Sanusi had told a Senate committee in 2014 that NNPC had received $67 billion and handed over only $47 billion.
After the allegations, Jonathan publicly dismissed the claim and replaced Sanusi, saying the banker had mismanaged the central bank's budget. Sanusi has since become Emir of Kano, the country's second-highest Islamic authority.
The PwC audit, however, said NNPC and its upstream subsidiary, the Nigerian Petroleum Development Company, should hand over $1.48 billion arising from unsubstantiated costs, duplicated subsidy claims and computation errors.
The report also recommended an overhaul of how NNPC is run.

"The NNPC model of operation must be urgently reviewed and restructured, as the current model which has been in operation since the creation of the corporation cannot be sustained," it said in the 200-page document.

An earlier one-page version of the report, which had been due out in September, was released in February.

The affair has caused consternation in a nation long accustomed to reports of grand graft in Africa's largest oil producer.

Analysts say Buhari, 72, managed to oust Jonathan in elections last month because voters believed he would tackle graft in Africa's largest economy.

Culled from Reuters in  Yahoo Finance

Money Minute: 5 ways wedding guests can save money and stay sane-By Mandi Woodruff

Forget the bride and groom -- weddings can be expensive for guests, too! The average wedding guest will shell out nearly $700 to see their loved ones walk down the aisle, according to the latest data from American Express.

Finding the right gift is only half the budget battle. Here are a few tips to help you save as a wedding guest.
1. If you were too late to lock in the group hotel rate, you might still have options. Get at least 10 people together and you can try reserving your own block at a discount. Or try booking a group through sites like Priceline or Hotelplanner.com. Or, skip the hotel and get a rental from Airbnb or HomeAway.com. The average hotel rate for wedding guests is about $170 a night, so use that as a good baseline when hunting down deals.
2. All those pre-wedding festivities can really add up. You’ve got engagement parties... bridal showers...bachelor parties in Vegas...ugh! Listen -- If you aren’t super close to the bride and groom, skip one (or all) of these events and save your money. No one will hold it against you.
3. Airfare is hands down the biggest expense for wedding guests, costing an average $225. The best time to buy flights for weddings is six weeks before the big day, so as soon as you get your invite, put a reminder on your calendar. Tuesdays and Wednesday mornings are the best. If you’re flying internationally, start looking for deals five to six months out.
4. Stick to the registry and buy your gift early -- people always go for the cheap stuff first!
5. Nothing to wear to the nuptials? Try renting your dress or suit instead of buying something new you might only wear a couple of times.

 Culled from Yahoo Finance

This retirement investing tool might actually be working-By Ben Steverman

For a decade, a new kind of mutual fund has been taking over Americans’ retirement portfolios.

The target-date fund is designed for people with no knowledge of investing. You pick the fund closest to the year you expect to retire—the Vanguard Target Retirement 2030, for example—and the fund does the rest. Containing a variety of stock and bond funds, the all-in-one funds gradually and automatically get less risky as retirement approaches.
There’s now evidence that target-date funds may be working. They’re giving investors solid returns, data from research firm Morningstar show. Just as importantly, they're boosting those returns by protecting investors from their worst instincts.

Good thing, because the retirements of millions of Americans, and especially young people, now rely on target-date funds.
This year, for the first time, more than half of all 401(k) contributions will go into target-date funds, research firm Cerulli Associates estimates. It projects the assets in target-date funds to hit $2 trillion by 2019, when 88 percent of all 401(k) contributions will go into the funds.
With 10 years of history, there’s now enough of a track record to judge just how well investors are doing in target-date funds. The average per-year return over the past decade was 5 percent, Morningstar estimates. That’s about what you would expect from funds that are a blend of stock and bond funds. Stock funds were up an annual 7.5 percent over the past decade, while bond funds were up an average 4.4 percent.

But target-date funds have one big advantage over other kinds of mutual funds, the data show. The average mutual fund has a flaw, which is that the average investor hardly ever does as well as his or her funds. Investors tend to jump in and out of funds at the wrong time. They buy high, choosing funds only after they've done well. And they sell low, dumping underperforming funds just as they’re about to take off. Picture an investor buying into a tech fund at the height of the Internet bubble in 2000 and then selling a few years later just before the sector revived along with such stocks as Google and Apple.
Investors in target-date funds, at least so far, seem to have avoided this curse. They’ve been sticking with their funds and doing surprisingly well in the process.
On average, target-date fund investors are doing 1.1 percent better per year than their funds. Investors in almost every other fund category lagged their funds over the past decade, including a -0.98 percent underperformance for U.S. equity funds and -1.3 percent for municipal bond funds.

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Bloomberg

Does this vindicate target-date funds? Not so fast. It’s possible the performance of target-date investors is a historical accident, caused by the funds’ growing popularity during a six-year bull market for stocks. The next time markets hit 2008-style turbulence, these investors may bail out of target-date funds, selling at the wrong time just as they panicked over their stock funds six years ago.
Another worry about target-date funds is their fees. Target-date funds charged investors 0.78 percent in fees last year, Morningstar says. That’s down from an expense ratio of 1.04 percent in 2008. But it’s still a drag on performance, with some investors paying three or four times more than others. Vanguard’s target-date funds charge 0.17 percent per year, and new funds from State Street and Pacific Investment Management Co. (Pimco) charge less than 0.3 percent. But meanwhile, more than a dozen target-date fund series still charge 1 percent or even higher.
Target-date funds may prove to be a valuable tool, but only at a reasonable price.

Culled from Bloomberg.com