Looking for a magic bullet
Throughout the financial crisis, target date funds came under considerable scrutiny when many of these retirement products lost a third or more of their value.

Despite a common understanding (or misunderstanding, as the case may be) that the glide path of these funds dialed down risk over time, many retirees and near-retirees were upset to find a higher than expected allocation to stocks. The "set-it-and-forget-it approach" led many to make incorrect assumptions about the level of risk they were taking on.

Though some funds did fail at their task, Noel Abkemeier -- a retirement actuary who specializes in guaranteed lifetime income products for Milliman -- defends their overall approach and calls some of the criticisms "a bit harsh."

Abkemeier, an active member of the Society of Actuaries, warns, however, that investors can't assume that any investment is guaranteed to be perfect for their needs at all times and in all markets.

"I think people think something like a target date fund is a silver bullet that is exactly molded to their needs and will never fail them," he says.

As for complaints about how some target date funds kept their holders invested in stocks until late in life, Abkemeir takes no issue with that strategy.

"You always have some life ahead of you, and there is always room for some degree of equity return," he says. "If it is diminishing over time, that's all very appropriate."

Complacency
The push for "set it and forget it" investment strategies, or being sold into supposedly low-risk products, can sometimes lead to inertia and complacency.

"One an investor believes that he or she has been invested in something safe , there may be a tendency to feel, 'OK, I moved everything to conservative investments, that means I can now breathe a sigh of relief, my anxiety is gone and I no longer need to maintain oversight of what's going on,'" Bar-Or says. "Investors should never become complacent. They should always be on top of things and be aware of what is being purchased in those funds and whether their adviser is actually doing what they are promising. Being complacent just opens the door for bad things to happen."

Fees
Even conservative, passive investments can be built with excessive or unnecessary fees, and investors should make sure they aren't paying too much for the peace of mind that comes with lowered risk. The compounding effect of those fees can severely cut into the size of a nest egg over 20 to 30 years.

There are plenty of conservative options that are well-diversified and carry low fees, Bar-Or says. Investors need to "invest in themselves" by doing the needed research to make sure they aren't paying more than they have to.

-- Written by Joe Mont in Boston.

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