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Why I Don't Like Target Date Mutual Funds · Suze Orman's Women & Money (And Everyone Smart Enough To Listen)

0:08
Suze: May 24th, 2026. Welcome everybody to the Women and Money
0:13
Suze: podcast as well as everybody smart enough to listen. Suze
0:16
Suze: O here and today is Suze School. I wish all
0:20
Suze: of you a very, very happy and thoughtful, thoughtful Memorial
0:26
Suze: Day weekend.
0:28
Suze: And when I say thoughtful, it's because I hope you
0:30
Suze: really think about what this weekend is really all about.
0:36
Suze: One more thing, tomorrow, May 25th, is a person that
0:43
Suze: I have worked with for over 20 years now by
0:47
Suze: the name of Carla Fried, and it is her birthday.
0:52
Suze: And Carla, really, many of you don't know this, but
0:57
Suze: has been my editor, my co-writer, has been with me
1:01
Suze: through most of the New York Times books that I
1:04
Suze: have written with her help, by the way, many of
1:08
Suze: the blogs that you read that you get every single week.
1:12
Suze: She has been there with me through thick and thin,
1:16
Suze: and she is absolutely brilliant.
1:20
Suze: So, Carla, I just wanna say once again, I thank
1:24
Suze: God so much for your birth because you have brought
1:27
Suze: so much depth and really intelligence to everything that everybody
1:33
Suze: is reading, especially under my name. It is really many
1:37
Suze: times everybody, both of us, just so you know, and
1:42
Suze: I just wanna wish you the happiest, happiest birthday of all.
1:48
Suze: All right.
1:49
Suze: Today, Suze School is all about target date mutual funds.
1:55
Suze: I told you that on Thursday, that I would explain
1:58
Suze: to you why I do not like them. So, today,
2:02
Suze: for you to really understand why I don't like target
2:06
Suze: date mutual funds, you need to also understand the bond
2:11
Suze: market and what is happening in the bond market. So,
2:15
Suze: get out your little Suze notebooks, and get ready to
2:20
Suze: take notes.
2:22
Suze: OK, listen to me, everybody. Have you not heard me
2:25
Suze: say what was, was, and what was will never be again.
2:33
Suze: And what I mean by that, when I've said that
2:35
Suze: to you over all these years, is that just because
2:39
Suze: something worked one way in the past, does not mean
2:44
Suze: that that's how it's going to work in the future,
2:47
Suze: all right?
2:48
Suze: The future is changing. I know all of you must
2:52
Suze: know that by now. AI alone is changing the future
2:57
Suze: big time. So the way that we invest today for
3:01
Suze: tomorrow is not how we invested more than just uh
3:05
Suze: even a few years ago, which by the way,
3:09
Suze: that is why it is so absolutely important that if
3:12
Suze: you have not already registered for part two of the
3:16
Suze: webinar that I gave on April 23rd, you need to
3:20
Suze: go to Suzeorman.com and do so now. We have over
3:24
Suze: 100,000 of you who have, and by the way, if
3:27
Suze: you have registered or you did register for the one
3:30
Suze: on April 23rd, you don't have to do it again,
3:33
Suze: just so you know. But it is on that webinar
3:37
Suze: that we're gonna talk about.
3:38
Suze: Investing for the future, not how you invested in the past,
3:44
Suze: and the entire webinar is gonna be hosted by just
3:48
Suze: me and Keith Fitz-Gerald, and you have got to be there. Seriously,
3:54
Suze: it may be the most important webinar I have ever
3:58
Suze: given in my entire life. All right.
4:01
Suze: Done. Let's talk about the bond market now.
4:05
Suze: Most people, you only obsess over the stock market, right?
4:09
Suze: It's a stock market, it goes up, it goes down,
4:11
Suze: and the stock market is what gets all the drama.
4:15
Suze: But really, truly sophisticated investors, you know what they watch?
4:21
Suze: They watch the bond market because the bond market is
4:25
Suze: where the serious money, everybody quietly tells you what it
4:30
Suze: really thinks. And right now the bond market is sending
4:34
Suze: a message warning, warning, warning. The long term treasury yields,
4:41
Suze: the 30 years, they have risen sharply.
4:44
Suze: And truthfully, these yields are up to levels that we
4:50
Suze: have not seen in a very long time.
4:55
Suze: And does that matter to you? Oh, you bet you
4:58
Suze: it does. It matters far more than most of you realize.
5:02
Suze: And why is that? Everybody, Treasury yields quietly, whether you
5:07
Suze: know it or not. They sit underneath almost everything in
5:11
Suze: your financial life your mortgage rate, your car loan, your
5:17
Suze: credit card, the cost for business to borrow, commercial real estate,
5:21
Suze: even the cost for the government itself to operate.
5:25
Suze: When those yields rise, money becomes more expensive for you,
5:32
Suze: for everybody, and that is where a lot of you
5:36
Suze: got blindsided.
5:38
Suze: And that included me, by the way.
5:41
Suze: That we assumed that the moment the Federal Reserve started
5:45
Suze: to lower its short-term rate, that your mortgage rate would fall.
5:50
Suze: Bond rates would fall because bond rates would fall. The
5:54
Suze: price of bonds would go up. Do you remember me
5:57
Suze: even a long time ago saying, I would buy a
6:00
Suze: 30 year bond rate at 4, 4.5%, 5%, because the
6:05
Suze: rates are going to go down, and when they go down,
6:08
Suze: those bonds should go up in value. Well, guess what?
6:12
Suze: That didn't happen.
6:15
Suze: And here we are now back where the 30 year
6:19
Suze: is at about 5.19%. Put a pin in that for
6:23
Suze: a second because I know what all of you are
6:25
Suze: thinking at this moment in time. You are wondering, Suze,
6:29
Suze: does that mean I should buy the 30 year bond?
6:32
Suze: What should I do right now?
6:34
Suze: I have to tell you, the answer to that question
6:37
Suze: really depends on what happens with oil.
6:41
Suze: Oil is the key to everything at this current moment
6:45
Suze: in time, not forever, but right now.
6:49
Suze: Are we gonna stay at war? Are we not gonna
6:51
Suze: be at war? This is with Iran. Uh, what's gonna happen?
6:56
Suze: Because whether you know it or not, oil and what's
6:59
Suze: happening over there, it flows through almost everything in your
7:04
Suze: life transportation, airlines, shipping, the food on your table, manufacturing,
7:10
Suze: your utilities, even packaging your products that come in.
7:15
Suze: So when oil jumps, and you've seen it jumping all
7:18
Suze: over the place, it goes up, it goes down, it
7:20
Suze: goes up and goes down, depending on what the president
7:24
Suze: says on one particular day or not.
7:28
Suze: So, therefore, what should you be doing right now, given
7:32
Suze: that nobody knows what's gonna happen over there.
7:37
Suze: Hey, I don't have a problem if you want to
7:39
Suze: dip your toe, not a lot of money, but dip
7:42
Suze: your toe into the 30-year bond. I told you, I
7:44
Suze: think on Thursday I bought some. If interest rates continue
7:48
Suze: to go up in the 30-year bond, I will buy
7:51
Suze: some more. Is it possible that they could go even
7:54
Suze: as high as 6%? Listen, anything is possible today. That's
8:01
Suze: a point that I just want to make for you. However...
8:04
Suze: Let me just for right now go back to interest
8:08
Suze: rates on bonds are going up and you gotta pay
8:13
Suze: attention to that, you know, years ago, and this is
8:17
Suze: the key here, when interest rates went down.
8:22
Suze: Almost everything went up. Stocks rose, real estate rose, bond
8:28
Suze: prices rose, private equity rose, even bad financial decisions often
8:34
Suze: worked out because cheap money has a way everybody is
8:38
Suze: just covering up mistakes. So all of you got used
8:43
Suze: to seriously, that interest rates can go up, but interest
8:47
Suze: rates will go down.
8:49
Suze: That pattern has broken, and it's been broken since 2020.
8:56
Suze: I want you to think about this. Interest rates have
8:59
Suze: gone up. The economy is not that great. Everything is
9:04
Suze: kind of all over the place yet. The stock market
9:08
Suze: has been going up and up and up.
9:12
Suze: So it isn't tied anymore to, oh, if interest rates
9:16
Suze: go down, everything goes up, the price of bonds and everything. Now,
9:21
Suze: interest rates have gone up, the price of bonds have
9:23
Suze: gone down, but the stock market has skyrocketed.
9:28
Suze: So, the system has changed, but here's the question.
9:34
Suze: Is the way that you invest, has it changed? Has
9:38
Suze: your understanding of how things really work changed? Because if
9:43
Suze: it hasn't changed, this is where I personally believe that
9:48
Suze: you can get in trouble. So that brings us to
9:51
Suze: the topic of today's Suze School that I told you
9:55
Suze: I was gonna talk about on Thursday's podcast, target, date,
10:00
Suze: mutual funds. Now, most of you
10:03
Suze: own target date mutual funds in your retirement accounts because
10:08
Suze: in 401(k)s, 403(b)s, whatever it may be, you are approached
10:13
Suze: and you are told or your friends have told you
10:16
Suze: or you think, oh, all I have to do is
10:19
Suze: put my money into this one mutual fund. I do
10:24
Suze: not have to watch it. All I have to do
10:27
Suze: is pick the date, target a date that I am
10:31
Suze: going to retire.
10:33
Suze: So if I'm 35 right now, maybe I would pick
10:37
Suze: a target date mutual fund that's 30 years from now.
10:42
Suze: So it would be 2056 would be the target date
10:47
Suze: mutual fund that I would pick. So you target the
10:51
Suze: age that you are going to retire or you think
10:53
Suze: you're gonna retire, and you put your money in this fund.
10:58
Suze: In the beginning years when you're younger, the majority of
11:02
Suze: the money is invested in stocks, with the theory being
11:08
Suze: that as you get closer and closer to retirement,
11:12
Suze: that they shift more and more of your money into
11:15
Suze: bonds to keep it safe.
11:19
Suze: That is how it works. That is a target date,
11:22
Suze: mutual fund, and you love it, cause you get to
11:25
Suze: be lazy. You don't have to think about it, you
11:28
Suze: don't have to wonder, somebody else is doing the investing
11:32
Suze: for you.
11:33
Suze: And you're fine with that. Well, you shouldn't be fine
11:37
Suze: with that, everybody, because what are the stocks that they're
11:40
Suze: investing in? All kinds of things you need to know
11:44
Suze: and it just may be that, by the way, you
11:46
Suze: will probably learn on the webinar on June 4th at
11:50
Suze: 6:00 p.m. East Coast time that it is just possible
11:54
Suze: that index fund investing is starting to change.
11:59
Suze: Things are changing and you have to change with it
12:02
Suze: when they change regardless of what the past tells you.
12:07
Suze: And it drives me crazy when people are saying, you know, Suze,
12:11
Suze: index ETFs or mutual funds have always outperformed managed mutual
12:17
Suze: funds or ETFs now. In the past, that was true.
12:21
Suze: But it may not continue to be true as time
12:25
Suze: goes on, and you may be leaving money on the table,
12:29
Suze: and you have to understand those things. But back to
12:33
Suze: target date funds, so when you are invested in a
12:37
Suze: target date fund, your investments are allocated according to your age.
12:46
Suze: You can't allocate things according to your age because you
12:49
Suze: don't know exactly, number one, when you're really gonna retire.
12:55
Suze: Number two, what is happening in the economy at the
12:58
Suze: time you want to retire, and do you even need
13:03
Suze: the money from your 401(k) or 403(b) or Roth IRA
13:06
Suze: or whatever it may be. Maybe you're in a situation
13:10
Suze: where your money is so well invested.
13:12
Suze: That the truth is you want to be more aggressive.
13:15
Suze: You don't want to be in bonds. What if you
13:18
Suze: were retiring this year? You have the stock market that
13:21
Suze: is absolutely skyrocketing, correct? Don't you think you would rather
13:27
Suze: be invested in the stock market at this point in
13:31
Suze: time if you were retired, especially if you had some
13:35
Suze: money that was liquid so that it could carry you
13:38
Suze: for 3 or 5 years of expenses?
13:41
Suze: And let that money grow, then have it 100% almost
13:46
Suze: invested in bonds at the time when interest rates are
13:50
Suze: going up and up and up and up.
13:55
Suze: Because remember everybody, a bond is a fixed income vehicle,
14:02
Suze: which means when interest rates go up, the value of
14:07
Suze: that bond goes down.
14:11
Suze: So, you are not guaranteed that when in fact you
14:15
Suze: need your money, when you do retire, that the money
14:20
Suze: that you have in your 401(k) is keeping pace with
14:24
Suze: inflation
14:26
Suze: and will give you the income that you need and
14:29
Suze: all of it happens to be where possibly in bonds
14:35
Suze: because of why your age. That makes no sense to
14:39
Suze: me at all. Again, write this down. You do not
14:43
Suze: invest solely according to your age. You invest according to
14:48
Suze: what's happening number one in the economy.
14:51
Suze: And number two, what's happening in your own personal economic life.
14:57
Suze: You are not all the same, but when you go
15:01
Suze: into a target date mutual fund, your money is treated
15:05
Suze: like you get older, it's in bonds. Now, a lot
15:09
Suze: of you are gonna say, but Suze,
15:12
Suze: my target date mutual fund doesn't really risk my money
15:16
Suze: because it's in short-term bonds. So I'm not gonna get hit.
15:21
Suze: It won't have a big downward move in case interest
15:25
Suze: rates go up. Put a pin in that for a second.
15:29
Suze: When you have a longer term bond.
15:33
Suze: 20 years, 30 years versus 3 months, 6 months, whatever
15:39
Suze: it may be, maturities, the longer the maturity of the bond,
15:45
Suze: the more fluctuation it has when interest rates go up
15:50
Suze: and interest rates go down, again, if interest rates in
15:54
Suze: the world go up, the value of your bonds go down.
15:58
Suze: If interest rates go down, the value of your bonds
16:02
Suze: go up.
16:04
Suze: Therefore, if you have a 30 year bond and interest
16:09
Suze: rates go up, it's going to go down in price
16:13
Suze: more than a 2 year Treasury note or a short
16:18
Suze: term treasury or whatever bond they may be in. So therefore,
16:23
Suze: a lot of you feel like you're absolutely safe. Why?
16:28
Suze: Because your money is in short-term bonds within your target
16:33
Suze: date mutual fund.
16:36
Suze: All right, everybody listen to me. If they're in short-term funds,
16:41
Suze: what interest rate are you currently making?
16:45
Suze: And are you keeping up with inflation? 'Cause I wanna
16:50
Suze: talk about inflation here and why I think more of
16:55
Suze: you need growth than safety. Listen, there's nothing wrong with
17:00
Suze: going into individual stocks or ETFs that pay a great
17:05
Suze: dividend
17:06
Suze: yield for you to get income and possibly growth on
17:10
Suze: your money as well versus a bond. Now that's not
17:14
Suze: to say that some of your money shouldn't be in
17:17
Suze: treasuries locking in a nice rate, but not all of it.
17:22
Suze: And for many of you, the majority of your money
17:26
Suze: is where in your retirement accounts. So the last thing
17:30
Suze: I want for you at this point in time is
17:33
Suze: to have 100% of your money when you get older
17:36
Suze: in a target date mutual fund, and that's what you
17:39
Suze: are retiring with. Doesn't make any sense to me. Let
17:43
Suze: me go back to inflation for a second.
17:47
Suze: Listen, inflation is emotional.
17:51
Suze: It is, and the problem is this. When you hear economists,
17:57
Suze: and it drives me crazy, can you imagine what I'm
18:01
Suze: like when I'm driven crazy? All right.
18:04
Suze: They talk about inflation as if you only feel this
18:08
Suze: year's numbers, as if you wake up each January and reset.
18:13
Suze: That is so stupid I can't even take it. You
18:16
Suze: do not feel the annual number. You feel the cumulative number.
18:21
Suze: If your grocery bills climb 5% over 5 years.
18:27
Suze: You feel 25%. You don't feel just a 5% increase
18:32
Suze: this year. You feel a 5% increase year after year
18:37
Suze: after year. And here's what's so sad. You do not
18:41
Suze: feel some cooler number that gets celebrated on the news
18:44
Suze: when they say prices have gone down. Have you seen
18:48
Suze: prices go down, really?
18:50
Suze: And that is exactly why so many of you still
18:53
Suze: feel squeezed, even when you keep hearing that inflation is
18:57
Suze: calming down. It is not calming down, everybody, and your
19:03
Suze: life is still expensive, your real life, and that is
19:09
Suze: what is important is that you have to understand things
19:12
Suze: are getting more expensive, and the problem is this in 2020.
19:19
Suze: Inflation started to go up because of the pandemic, certain
19:23
Suze: things like that, and now because of oil and everything else,
19:27
Suze: inflation is on top of something that already had been inflated.
19:32
Suze: That's why your homes are more expensive, your insurance is
19:35
Suze: more expensive, your car interest rates, everything is more expensive.
19:41
Suze: So it is very, very important that for you to
19:44
Suze: have a successful retirement.
19:47
Suze: That your money is doing better than inflation, that you
19:51
Suze: don't hear these words transitory. This is not transitory. This
19:56
Suze: is just how life is today. And yeah, you hear
20:00
Suze: my voice feeling passionate about this because I don't want
20:06
Suze: you to buy the ticket that many people are trying
20:10
Suze: to sell you.
20:12
Suze: I want you to buy the ticket that gets you
20:15
Suze: on a financial train ride to take you where you
20:19
Suze: are meant to be.
20:21
Suze: And where are you meant to be? You are meant
20:24
Suze: to be in a situation where you are out of debt.
20:27
Suze: You own your home outright, you have money for retirement,
20:30
Suze: you can keep up for inflation, you can live the
20:34
Suze: life that you deserve to live. Just that simple.
20:40
Suze: So, a target date mutual fund is not going to
20:44
Suze: do that for you, 'cause again,
20:47
Suze: interest rates go up, and I personally think they're going
20:51
Suze: to stay up for quite a while. I just do.
20:54
Suze: I don't see what would make them come down. So
20:58
Suze: if interest rates are up here, that means bond prices
21:02
Suze: are down. And if you are retiring now and all
21:07
Suze: your money is in a target date mutual fund.
21:11
Suze: You're not getting the interest that you should be getting
21:14
Suze: on that money, and you are not getting the growth.
21:18
Suze: That you need to keep up with inflation. Now that
21:23
Suze: is just a very small reason why I don't like
21:28
Suze: target date mutual funds. Now I know what you're thinking.
21:31
Suze: You're thinking, well, Suze, if you don't like target date
21:34
Suze: mutual funds, what do you want me invested in? And
21:38
Suze: that is exactly why I want all of you to
21:42
Suze: tune in
21:44
Suze: to the webinar on June 4th, 2026 at 6 p.m.
21:50
Suze: East Coast time. Listen, just register. If you can't make it,
21:54
Suze: it will be repeated three or four times after that
21:59
Suze: until 12:00 a.m. Pacific Coast time on June 8th, so
22:04
Suze: you will catch it somewhere.
22:07
Suze: Also, if you want, it will be aired simultaneously on
22:10
Suze: my YouTube channel, youtube.com/SuzeOrman.
22:15
Suze: But I want you to register and be part of it.
22:19
Suze: One thing all of you will be getting, who have
22:22
Suze: registered will be a quarterly update for one year from
22:27
Suze: both Keith and myself telling you about the investments we're
22:31
Suze: gonna talk about, how have they done, what you should
22:35
Suze: be doing, so we're gonna keep you informed
22:38
Suze: and as well there will be birthday pricing, because the
22:41
Suze: very next day is my 75th birthday and we will
22:46
Suze: be celebrating with you. And one way I always celebrate
22:50
Suze: my birthday is I don't want a gift, but I
22:54
Suze: love giving gifts, so I'm asking you to be there
22:58
Suze: and take advantage of it. Do you understand the point
23:03
Suze: of this podcast today, this Suze School?
23:06
Suze: The past is the past, and it may no longer
23:11
Suze: predict the future and what you should do with money.
23:15
Suze: I want you to be an active investor where you
23:18
Suze: are deciding, oh, should my money be in index funds,
23:23
Suze: in this, in that? Should there be some international funds?
23:27
Suze: What should I be invested in and you like to
23:30
Suze: watch it.
23:31
Suze: You make decisions. And for those of you who are
23:34
Suze: in Roth retirement accounts, like individual retirement accounts, where you
23:40
Suze: have choices of what you really can invest in, such
23:44
Suze: as ETFs.
23:46
Suze: Well, you're gonna learn that Fitz is finally bringing out
23:51
Suze: his exchange traded fund. The symbol will be Fitz. You
23:55
Suze: can't buy it yet. We can't really talk about it
23:59
Suze: because of SEC rules yet, but I want you to
24:03
Suze: hear about it.
24:04
Suze: So, I really think that that ETF will solve a
24:08
Suze: lot of your problems for today, as well as in
24:12
Suze: the future. All right, I think that's probably enough for
24:16
Suze: one day, don't you think? Cause it is Memorial Day weekend,
24:19
Suze: and I don't want to take up too much of
24:21
Suze: your time at the beach or wherever you happen to be.
24:24
Suze: But until Thursday when Miss Travis joins us again, there's
24:29
Suze: only really one thing that I want you to remember
24:31
Suze: when it comes to your money, and it is this
24:34
Suze: people first, then money, then things. Now you stay safe,
24:39
Suze: and Carla, happy birthday tomorrow. Bye bye.