Key Takeaways
- Conventional wisdom says that a target-date fund can be a simple approach to retirement planning, but a 2025 survey found that 84% of wealthy retirement investors who are nearing retirement prefer other options.
- Target-date funds are one-size-fits-all, which may work better for younger investors but less well as investors get older.
- Wealthier retirees aren’t just saving more but spreading money across different account types and pulling from them strategically to keep more of what they’ve earned.
More than two-thirds of 401(k) account holders have money in target-date funds (TDFs), which shift investments from riskier to more stable assets over time as a person gets closer to retirement.
According to the 2025 Retirement Survey from Allspring Global Investments, however, a whopping 84% of investors nearing retirement with at least $200,000 in household investable assets prefer other options over target-date funds. The result is that only 35% of their 401(k) assets and 2% of their individual retirement account (IRA) assets are invested in TDFs.
Are there lessons in this for the average investor?
Why Target Date Funds Are Less Appealing to Wealthier Investors
Nate Miles, head of retirement at Allspring, said that wealthier adults nearing retirement are “different than the average person for whom target-date funds are modeled.”
Take taxes. Miles points to an example of a wealthier W-2 employee for whom taxes have automatically been deducted from regular paychecks for an entire career. While “there are ways in which [that person] can manage their tax burden via charitable deductions or mortgage interest,” Miles said, “for the most part, taxes are just something they pay, not manage.”
So at retirement, they may have to face something that comes as a surprise—which accounts should they withdraw from to minimize their taxes? Miles points out that “only 53% of retirees have a preference for withdrawal by tax status, and yet tax-efficient withdrawal plans can greatly affect retirement outcomes.”
Despite the many benefits of defined contribution plans—they get people to save more, and save, period—Miles said that the automated nature of these plans may leave those nearing or in retirement unprepared for important decisions, for example, about when to start making withdrawals.
Retirees also face decisions about how much money they’ll need monthly or annually based on how long that money will need to last and what their returns will be, how to draw down savings across taxable, tax-deferred, and tax-exempt accounts, and more.
Miles acknowledges this is a “tall task” for many, made more complicated by each investor’s unique circumstances.
“As participants mature, their differences matter more and more with each passing year,” he said, yielding “a retirement strategy that differs from one investor to the next.”
How You Can Follow the Lead of Wealthier Investors
Target-date funds work on autopilot, but wealthier investors are taking the wheel. Here’s how you can borrow from their playbook:
If you’re nearing or in retirement:
- Withdraw strategically: Tap your taxable accounts first to let tax-deferred and tax-free money keep growing.
- Consider a Roth conversion: Moving money from a traditional IRA to a Roth now could save you taxes later.
- Plan your drawdown order: The sequence matters—pulling from the wrong account first could cost you thousands in unnecessary taxes.
If retirement is still years away:
- Max out multiple account types: Don’t just rely on your 401(k)—explore backdoor Roth IRAs, HSAs, and even taxable brokerage accounts.
- Diversify beyond stocks and bonds: Wealthier investors mix tax-efficient holdings (index funds, exchange-traded funds) with alternatives like real estate investment trusts and actively managed funds to balance growth and tax strategy.