Are target-date funds still good after 65?

Is a target-date fund still the right call once you’re retired? It was a great tool for the saver you used to be. It’s a blunt one for the retiree you’ve become. A target-date fund picks a year, glides from stocks toward bonds as that year approaches, and rebalances itself, a genuinely good autopilot for a 35-year-old who’d otherwise do nothing. The trouble is that everything making it great for accumulation works against you in retirement.

What the fund can’t see

A target-date fund knows one thing about you: a date. It doesn’t know you also hold a taxable brokerage account, a Roth, and an old pension. It doesn’t know your real spending, your other income, or your tax bracket. It assumes you’re an average person retiring in a given year and allocates to that average. You are not the average, especially with a larger portfolio and a more layered tax picture.

So it can’t run a tax-efficient withdrawal order across your accounts, because it only sees its own slice. It can’t practice asset location, putting the tax-ugly holdings where they hurt least, because it doesn’t know your other accounts exist. And it has no idea how much you need next year, so it can’t protect that money the way a real income plan does.

The taxable-account problem

Hold a target-date fund in a taxable account and the autopilot turns against you. Every time it rebalances, it can trigger capital gains you didn’t choose and didn’t want, landing on your tax return whether or not you needed income that year. The very feature you loved, automatic rebalancing, becomes an automatic tax bill, and it can nudge you into the brackets that drive your Medicare premiums through IRMAA. In a tax-deferred IRA that’s harmless. In taxable, it’s a slow leak.

The glide path may not be your path

These funds also glide to one generic allocation, and a single number can be wrong for you in either direction. Too conservative, and a thirty-year retirement loses the growth it needs to outrun inflation. Too aggressive in the first few years, and you’re exposed to sequence-of-returns risk, the early-crash danger that forces you to sell low. A real plan separates the money you spend soon from the money that grows for decades. A target-date fund blends them into one dial.

If your accounts are large

The more accounts and tax complexity you have, the more a one-size autopilot leaves on the table, often far more than the fund’s fee. The fix isn’t exotic. Hold a few years of spending in safe, liquid assets like a bond ladder, keep the growth engine in low-cost diversified stock funds, place each holding in the account where it’s taxed best, and let your withdrawals do the rebalancing. That’s a target-date fund’s job, done with eyes open to your whole picture.

A target-date fund is autopilot for the climb. Retirement is the descent and the landing, and that’s exactly when you want your hands back on the controls.