Generation X and Millenials- Are You Ready for the "R" Word?

Generally, people born from 1965-1976 are considered to be part of Generation X. Those born from 1977-1998 are usually called Millennials, or Generation Y. Some estimate that as many as 126 million people comprise of these two large, influential groups. While some of us Gen X'ers or Millennials haven't even begun to think about retirement, a number of us have either set aside money in a savings account or with our employer's 401k plan. Back when our parents were changing our dirty diapers, it was not unheard of to hear someone fully relying on their pension plan or social security after retirement. However, most of us are aware that social security and pension plans are a thing of the past. So, how can one make a sound investment to have for their retirement years?

If you have taken an interest in mutual funds lately, you might want to check out some target-date mutual funds. Target-date mutual funds, also known as lifecycle funds are self-diversified mutual funds that usually start out aggressive and gradually become more conservative as it becomes closer to your retirement. So in other words, instead of trying to pick ten different mutual funds (usually from more than one fund family) you can have access to all those mutual funds in one fund or portfolio. These portfolios are designed to coincide with an investor's retirement year, ranging from the year 2030 to 2055.

But are these funds the best way for you to invest? If you are the type of investor who doesn't really pay too much attention to the market or if you are looking for a "simple, low maintenance" way to invest, then target- date mutual funds may be the way to go. Target-date mutual funds are good for the too-busy investor who has too little time on their hands. They need a portfolio that works for them and makes consistent changes, when they cannot do so. Financial advisors suggests in not placing all your eggs in one basket. If you are trying to have money left over while in retirement, you don't want to have all of you money in just one type of investment. What will you do if that investment tanks? However, if you are comfortable with picking your own mutual funds and you are knowledgeable about your investment style, you might want to keep looking elsewhere.

Some disadvantages of these types of mutual funds:

Running out of money while in retirement.
Investing in junk stocks or bonds because they are already included in the portfolio.
Not all target-date mutual funds are alike.

Don't be discouraged though, while target-date mutual funds are not the "end all, be all" of mutual funds (seriously are there any?) they still offer a great way to diversify your portfolio and a solid introduction to the financial market.