Scott Goodwin Thomas

Target Date is not a excuse to set and leave it alone and assume all is well. It serves the purpose for simple approach to select an allocation and then know that as the years roll on the allocation will have less stocks and more bonds and hopefully address risk along the way. There are a couple of more questions that should be raised here like, what is your time horizon? How much money do you have? Are there special cash flow needs to address like the withdrawal for auto or other items? Cash flow needs and risk will dictate potentially if you are correctly positioned and diversified for your risk and cash needs. An example of how cash flow might drive the solution is not all target date funds have the same cash flow or risk for the specific date. Higher cash flow needs may suggest higher yielding bonds or annuity or real estate investment trust or the like to be incorporated. Overall if someone has only a few thousand dollars then a target fund may be the best choice and could serve to diversify enough.

Advantages compared to what? Other options are: 1) saving outright for college the earnings are taxable 2) UTMA or Uniform Transfers To Minors Act transfer the money to children and they get control at age of majority 18-21 year of age and few little benefit unless someone sues you and their money is protected 3) Life or annuities offer some tax relief but are not generally designed to handle putting money in now and then needing it back in next 20 years 4) Real Estate purchase of house near a campus on which you may send your children could be a wiser choice but lots of other issues to address 5) Prepaid college through your State which is a cousin to the marketed 529 plans is a good choice with some lock in to costs. 529 Plans are nice estate planning tool for wealthy grandparents to fund grandchildren's educational needs. One other consideration is Educational IRA with lower limits may provide more efficient and flexible solution. Why? Educational IRA address housing and other costs in more liberal fashion and also allows for private school prior to college as well. 529 will be there as effective funding if you possibly need the money for middle school or high school. If I had more information I could render and more custom answer.

Please allow me to ask a question of all of you answering this question. Come March 1, 2012 when Bill Gross of PIMCO Total Return rolls out their ETF as mirror of PIMCO Total Return which of these should a fiduciary purchase? Oh, and do not forget your client is tax sensitive and fee sensitive. What are all advisers who call themselves fiduciaries going to do? Half the costs, no forced tax due to sell offs. I believe this one issue will be a major change in the fee vs broker and all the talk that goes with which is better. This will be a game changer.