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If ignorance is bliss, then target retirement date funds have arrived just in time for those who are seeking that state of mind. Start humming that mantra as you invest your 401(k) account with the target date that matches the time you have left until retirement. Then, sit and watch as your contemporaries at work slowly accumulate substantially more money in their account over time -- maybe 50 percent more -- by actively managing their money and safely adopting more risk. What I just wrote is not a contradiction in terms as I'll explain in a moment.

Meanwhile, the Vanguard fund organization has just published a 96-page report on how Americans are saving these days. The general gist of the extensive work was to outline the degree to which "professionally managed allocations" were becoming the dominant investment choice in 401(k) plans. That term is a euphemism for "target date funds," which, in turn, is a euphemism for 401(k) "rip-off."

Target-date funds start with an aggressive, stock-dominated allocation of funds and moves progressively toward bonds and less risk as someone approaches retirement 30 years later.

These funds are now used by 51 percent of all 401(k) participants. The number is up 45 percent since 2007. It is driven by the realization on the part of mutual fund companies that they could make a lot more money herding people into a mix of different funds, charging for each of the funds in the mix, and then charging another layer of fees for the allocation of funds making up the mix. I'm like, "Where are the customers' yachts?"

Here's the T. Rowe Price explanation of their target-date fund program: "To invest in a diversified portfolio of underlying T. Rowe Price mutual funds consisting of about 90 percent stocks and 10 percent bonds for several years, then increasing the allocation to bonds over time. The fund's allocation to stocks will remain fixed at 20 percent approximately 30 years after its target date."

My question? Why any bonds at all in early years, and why not more than 20 percent in stocks at and into retirement? Have any of the "professional managers" ever heard about something called inflation? Today's $1,000 will pay $400 worth of expenses in 20 years at 3 percent annual inflation. That's equivalent to losing half of one's money.

These target-date funds stand in the way of successful investing by giving retirement plan participants a false sense of security. They absolve financial institutions of what they see as an expensive obligation to educate 401(k) participants and really help the latter understand how to manage money. I know you can bring a horse to water, etc., etc., but there is something to be said for the continual drip of investment education that will sink in if delivered year after year.

Unfortunately, the financial services industry, awash in profits thanks to a rising stock market over the last four years, just doesn't want to spend the money on annual seminars and individual employee assistance. The answer is a combination of target date funds and advice to just "go to the Web" for planning tools that tell people next to nothing about actual investment strategies.

In simple terms, here's what investors need to know: Young people should have all of their money in a combination of stock-oriented mutual funds that represent different investments styles and types. This creates diversification and reduces risk. Using diversification to reduce risk allows investors to allocate at least some money to investment types that inherently bring more risk and greater returns over longer periods. The result, during the so-called "lost decade" ending in 2010, was about a 6 percent annual rate of return using this strategy. Over time it can create a 12 percent annual return on at least some of the more risk-prone assets (like small company funds and technology), thanks to the risk premium offered by the invisible hand of economic forces. Target funds miss all of this.

As for retirees, I've already pointed out the disaster in store for them if they leave retirement money in a target fund completely full of bonds. They need a 50/50 mix of aggressive bond funds and a collection of large-company, dividend-paying stocks to support a retirement lifestyle and protect against inflation. The lesson here is to take the time to gain financial education rather than letting the fund industry push you around.

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