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just got my 401k package in the mail yesterday so I was going through some of my options and I wanted to know what others thought about this. Fidelity is the company it will be through and one of the options I was considering is called the Fidelity Freedom Fund 2040 (FFFFX) basically it is designed for someone looking to retire at around 2040. I'm 23 so that's exactly when I'm looking at retiring, basically while you're young the fund takes an aggressive stance and as time goes by the assets are reallocated becoming less risk averse. I'm contributing 5% of my pay in order to get the max out of my matching. I'm curious if anyone thinks good or bad things about this fund. I would probably put 100% of my 401k in this since it invests in about 17 different funds and I would get a good deal of exposure and diversification.


Kudos for thinking about your 401k this early. I know people who only started worrying about retirement savings in their 40's.

Let's start with the easy advice: contribute whatever it takes to get the maximum matching dollars. It's not everyone who offers you free money (!). After that, you might want to contribute to a Roth IRA and/or more to the 401k and/or build up an emergency fund, stay out of debt, etc, etc. Ideally, the more you save, the better, but not at the expense of not having an emergency fund or running up credit card debts.

Next: I don't think you should put all of your eggs in one basket, even in this "fund-of-funds." And, in general, I'm not a big fan of these "retire in X years" type accounts.

No one mutual fund---or fund manager---is fool proof. Just because the Freedom account invests in 17 different funds doesn't mean that the 17 funds are all different...it could be that 3 or 4 of them have similar holdings, and thus aren't really that diverse [or not, you need to find out]. And you are paying for the expense of managing the constituent funds plus the fund-of-funds.

If you want to invest some money in cash, some in bonds and some in stocks, you can pick your own percentages and spread them among the relevant options in your 401k plan and change them as you think fit. For that matter, since your 401k is going to sit there untouched for over 35 years (with luck), you might want to put everything in equities.

Good luck,
JDOyster

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