Suze Orman Warns This Popular 401(k) Target Date Funds Trap Could Hurt Your Retirement
Is your set it and forget it plan a mistake? Our resident financial expert reveals the hidden risks for women over 50
Key Takeaways
- Suze Orman warns that investing by age alone ignores your personal income needs.
- These funds don't react to inflation or market shifts, which can stall your growth.
- Switching to low-cost ETFs and dividend stocks offers more control and steady cash flow.
You’re reviewing your 401(k) options, trying to make the smartest choice for your future, when you see it—a target-date fund with your retirement year right in the name. It feels like the easy answer, the safe choice. Just set it and forget it, right? But what if that “easy” choice is actually putting your retirement at risk? That’s why financial guru Suze Orman, the host of the Women & Money podcast and author of The Ultimate Retirement Guide for 50, is sounding the alarm about target-date funds. She says they’re built on faulty assumptions—and she has a smarter alternative. Here’s what you need to know.
Q: I recently got new investment choices in my 401(k), and I’m considering a target-date fund. Are they worth it?
Suze: When people ask me whether target-date funds are a good investment, my answer is simple: They’re built on assumptions I don’t agree with.
Target-date funds assume you should invest based on your age. You shouldn’t. You should invest based on your needs and what’s happening in the economy.
Two people can be the same age and live very different financial lives. One may have guaranteed income from a pension and Social Security. Another may be relying entirely on their investments to produce income. Yet a target-date fund treats them the same, automatically shifting money to more conservative investments just because the calendar says so.
That can be dangerous.
The hidden risk of getting too conservative too soon
Growth still matters as you get older. People are living longer, inflation doesn’t retire and healthcare costs keep rising. If your portfolio becomes too conservative too soon, you risk running out of money—not because you invested poorly, but because you followed a formula that didn’t fit your life.
Another problem with target-date funds: They don’t respond to the economy. They move on autopilot, ignoring interest rates, inflation and market cycles. That’s not a strategy—it’s a schedule.
So what do I prefer instead? I prefer ETFs (exchange-traded funds) and high-quality, dividend-paying stocks. ETFs offer broad diversification, transparency and low costs. Dividend-paying stocks can provide real income—cash you can use—rather than forcing you to sell shares just to live.
This approach allows you to:
- Adjust your portfolio as economic conditions change
- Focus on income when you need it
- Maintain control over fees and risk
It’s not about chasing returns. It’s about building a portfolio that works for you, produces income and can adapt to real-world conditions.
Age is just a number. A date is just a guess. But income, flexibility and control—that’s how you protect your future.
This story first appeared in the April 6, 2026, issue of Woman’s World magazine.
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