TROUBLED ECONOMIC TIMES present a challenge to Council 2 members whose retirement funds are invested in defined contribution (dc) plans.

The questions abound:

How much should I invest in each available mutual fund? Where is the best place to put my retirement money at this time of financial turmoil? Should I move all my money out of stocks because they are going down and might continue to fall further? Should I put all my money in the safest investments I can find?

For the individual investor in dc funds, deciding how to invest retirement funds can be tough, agrees Joe Dear, executive director of the Washington State Investment Board who makes many of the investment decisions for our pension funds.

But, he says, help will soon be on the way.

A new series of options called target-date funds will become available for pers 3 defined-contribution investors in the near future.

These funds are usually identified by the year closest to that in which the person expects to retire, such as the 2030 fund or the 2040 fund.

They are designed to change the investment mix over time as an investor nears retirement age.

As a result, they provide the appropriate risk level for every age.

“These are portfolios managed for the long term and devised to be able to withstand the ups and downs of investing in risk markets,” Dear explains.

“By providing one-stop shopping, they are easier for participants to understand. And they place the critical asset-allocation and rebalancing decisions in the hands of investment professionals.”

The funds will eliminate the need for investors to find time to manage their choices, to understand all available investment options, to make the best investment allocations and to change their investment mix over time.

Individual investors often make unwise investment decisions at the outset by investing in what they see as the safest funds rather than those that might be volatile but might provide the best returns over time.

They also fail to rebalance their funds on a regular basis, leading their accounts to become top-heavy with funds that have performed well in the short term, but might not always do so.

Dear says the troubles in the u.s. economy are likely to continue for a while, testing patience and confidence in our investment strategies.

But policy makers are responding and eventually returns will revert to their long-term averages and the benefits of investing in a globally diversified portfolio of high quality assets managed by skilled investors will become apparent, he adds.