Americans love “set and forget it” products. Like rotisserie roasters and slow cookers that prepare delicious dinners while we’re miles from the kitchen, any approach that takes out complexity is beloved in our harried, overworked society.

That’s why index funds are growing so rapidly. Why pay an advisor good money to pick stocks when the data show that the market return slays actively managed funds?

That’s good. But “set it and forget it” is also the driving force behind target-date funds, which combine a set of investments into a single, age-specific portfolio.

If you have a 401(k) at work, you’ve probably seen these products. You pick a retirement date, in five-year increments, and put all your money into a single fund.

The concept is right in the name. You get the 2035 Fund, the 2040 Fund, or the 2045 Fund, and so on.

The promise of these funds is that they’ll simplify a multifaceted decision into just one: What year do you think you’ll retire?

Then, over the years, the funds automatically move from more risk, meaning more stocks, to less risk, which means selling stocks bit-by-bit and buying bonds instead.

It’s right to applaud the simple approach — the “nudge” as Nobel Prize winning economist Richard Thaler would put it — toward doing the right thing automatically.

You should own less stocks as you get older. It just makes sense.

Young and old

But here’s the rub: Target-date funds are not universally cheap. They are not universally accurate in judging personal risk tolerance.

And most importantly, they’re not right for many people because your retirement age could have little to do with your long-term need for growth from stocks.

I could easily tax your attention span here with a recitation of the research on withdrawal rates and expected returns, inflation, blah blah blah. But I won’t.

Instead, I’ll share two simple patterns that I see over and over again with my own clients and let you be the judge.

When you were young and just starting out, how confident were you as an investor? If you were like the vast majority of young savers, probably not that confident.

The result, unfortunately, is that many young investors take too little risk. They put away money, sure, but a lot sits in cash, uninvested, or they end up in a 60/40 stock-to-bond portfolio.

Being young means you have time, lots of time, to save. It’s really when you want to be 100% invested in stocks.

A decline (or two) could happen, sure, but you’ll have decades to buy into the lower market and reap the rewards of patient, long-term investing.

Misplaced confidence

Here’s the second observation: Many middle-aged investors are still underinvested in stocks, but they also begin to concentrate their bets. They have confidence in their investing abilities, but it’s misplaced.

Now’s the time when they should diversify and avoid one-way bets on fashionable, unproven asset classes. “One way” too often means down, and then out.

Fearing risk, many middle-age investors instead run for the supposed safety of target-date funds. Fine, but it doesn’t help to own a fund that’s 50% bonds at age 65 — if you live to age 95.

You’ll need the compounding power of stocks to finance a long life. If you’re married, chances are one of you will make it to that 90-something point.

Nor does it help to pay a ton of money to a target-date fund manager to simply shift your portfolio by inches every year. A computer could do it, and in many cases a computer does. You just end up paying more in fees.

The safe bet is to look at your investments in the context of your true cost of retirement, your actual longevity, and the measurable risks and rewards of long-term investing. That means working with a real human advisor who takes the time to understand your retirement goals and concerns.

It’s very hard to buy a “set and forget it” plan that truly captures the whole picture of you, even if you think you know what will happen 20 to 30 years down the road.

Few of us do, of course. That’s why planning makes a difference.

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