Retirement plans: (k) vs. Target-Date Funds (like Vanguard Target Retirement 2055 Fund)
Quick Verdict
Both are suitable for retirement savings, with target-date funds simplifying investment management and 401(k) plans potentially offering employer matching and more investment control.
- Target-date funds offer automatic diversification and professional management.
- 401(k) plans may offer a wider range of investment options and employer matching.
- Both offer tax-deferred growth and are subject to early withdrawal penalties.
Key features – Side-by-Side
| Attribute | (k) | Target-Date Funds (like Vanguard Target Retirement 2055 Fund) |
|---|---|---|
| Contribution Limits (Annual) | — | — |
| Expense Ratio | — | — |
| Investment Options | — | — |
| Management | — | — |
| Vesting | — | — |
Overall Comparison
Diversification: Target-Date Funds; Employer Match: 401(k); Fees: Target-Date Funds (Vanguard)
Pros and Cons
401(k) Plan
Pros:
- Tax advantages (Traditional and Roth options)
- Employer matching contributions
- Range of investment options
- Portability (rollover options)
- Automatic enrollment (for some plans)
- Potential access to financial advisors
Cons:
- Fees and expenses (expense ratios, administrative fees)
- Withdrawal penalties before age 59 ½
- Investment risk
- Vesting schedules for employer contributions
Target-Date Funds (Vanguard Target Retirement 2055 Fund)
Pros:
- Diversified portfolio in a single fund
- Low expense ratio (0.08%)
- Professionally managed asset allocation
- Tax-deferred growth
- Automatic enrollment features available
Cons:
- Subject to market volatility
- Early withdrawal penalties
- RMDs required after age 73
User Experiences and Feedback
401(k) Plan
What Users Love
- No highlights reported.
Common Complaints
- No major complaints reported.
Value Perception
- No value feedback reported.
Target-Date Funds (Vanguard Target Retirement 2055 Fund)
What Users Love
- No highlights reported.
Common Complaints
- No major complaints reported.
Value Perception
- No value feedback reported.