Financial Planning: the right target-date funds strategy for clients

Christopher Parr was quoted extensively in this article by Donald J. Korn on target-date funds strategy (or TDFs) in the September, 2016 issue of Financial Planning Magazine.

Parr discusses two approaches advisers can take when using TDFs in client portfolios.

  • “Some funds have a glide path to the date of retirement, gradually reducing exposure to stocks until the specified year of retirement and then leveling off,” says Christopher Parr, CEO of Parr Financial Solutions in Columbia, Maryland.
  • Alternatively, a TDF on a glide path through the targeted year typically has a higher allocation to stocks at that date, but decreases equities afterward.

While real life might throw a curveball to advisers who see themselves on the “through” side, Parr says, “My preference is to keep reducing equity allocations as retirees grow older.” He tells of a client who is in his 90s with a moderate-risk portfolio. “He’s comfortable,” Parr says, “so he’s not changing his allocation.

Thus, the portfolio brought to retirement may be fine all the way through. Or, as Parr observes, some clients are reluctant to adopt a more conservative stance because “nobody wants to face up to getting older.”