Why the Majority of Affluent Investors Steer Clear of These Retirement Funds and What That Could Mean for You

Main Insights

• While target-date funds are often promoted as a straightforward solution for retirement planning, a 2025 survey reveals that 84% of affluent investors approaching retirement actually favor different strategies.

• Target-date funds offer a uniform approach, which may be more suitable for younger savers but tends to be less effective for older investors.

• High-net-worth retirees not only accumulate more savings but also diversify their assets across various account types and carefully plan withdrawals to maximize their after-tax income.

Over two-thirds of individuals with 401(k) accounts invest in target-date funds (TDFs), which gradually shift portfolios from higher-risk to more conservative investments as retirement nears.

However, findings from the 2025 Retirement Survey by Allspring Global Investments indicate that a significant 84% of investors with at least $200,000 in investable assets and nearing retirement opt for alternatives to target-date funds. As a result, only 35% of their 401(k) holdings and just 2% of their IRA balances are allocated to TDFs.

What can everyday investors learn from these preferences?

Why Wealthy Investors Are Moving Away from Target-Date Funds

Nate Miles, who leads retirement initiatives at Allspring, notes that affluent individuals approaching retirement have needs that differ from those of the typical target-date fund investor.

Consider the issue of taxes. Miles highlights that many high-earning W-2 employees have had taxes withheld automatically throughout their careers. While options like charitable deductions or mortgage interest can help, most simply pay taxes as required rather than actively managing their tax situation.

Upon retiring, these individuals may be caught off guard by the need to decide which accounts to tap first to minimize taxes. Miles observes that only 53% of retirees have a withdrawal strategy based on tax implications, even though tax-efficient withdrawals can significantly impact retirement finances.

Although defined contribution plans encourage saving, their automated features can leave retirees unprepared for crucial decisions, such as when and how to begin drawing down assets.

Retirees must also estimate how much income they’ll need each month or year, how long their savings must last, and how to coordinate withdrawals from taxable, tax-deferred, and tax-exempt accounts, among other considerations.

Miles admits that navigating these choices is challenging, especially since every investor’s situation is unique.

“As people get closer to retirement, their individual differences become increasingly important,” he explains, resulting in highly personalized retirement strategies.

Adopting Strategies Used by Wealthier Investors

While target-date funds operate on autopilot, many affluent investors prefer a more hands-on approach. Here are some tactics you can consider:

For those nearing or already in retirement:

• Be strategic with withdrawals: Start by using funds from taxable accounts, allowing tax-advantaged accounts to continue growing.
• Evaluate a Roth conversion: Converting traditional IRA assets to a Roth IRA now may reduce your future tax burden.
• Plan the order of withdrawals: The sequence in which you access your accounts can have a significant impact on your overall tax liability.

If retirement is still on the horizon:

• Maximize contributions across account types: Don’t limit yourself to a 401(k)—consider options like backdoor Roth IRAs, HSAs, and taxable brokerage accounts.
• Expand your investment mix: Wealthier investors often combine tax-efficient vehicles such as index funds and ETFs with alternatives like real estate investment trusts and actively managed funds to balance growth potential and tax considerations.