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DALLAS -- Are target-date mutual funds missing the bull's-eye?

It appears the answer is yes for many of these funds, which are designed to smooth a worker's path to retirement by automatically resetting the investments as the investor ages.

Typically, a target-date fund changes its asset allocation to become less risky as the investor nears retirement.

But because there are crucial differences in the funds' asset allocation, some of the more aggressive have racked up big losses in the recent bear market and have drawn the attention of regulators and lawmakers.

"The results of excessive risk can be devastating for those on the brink of retirement," said Sen. Herb Kohl, a Wisconsin Democrat and chairman of the Senate Committee on Aging, which has been investigating target-date funds. "One 2010 target-date fund lost 41 percent in 2008."

Attention has been focused most on 2010 funds, whose investors are about to retire.

In 2008, the average loss among 31 funds with a 2010 retirement date was almost 25 percent, said Mary Schapiro, chairwoman of the Securities and Exchange Commission, which is reviewing target-date funds' disclosure about their asset allocations.

"Varying strategies among these funds produced widely varying results," she recently told mutual-fund executives. "Returns of 2010 target-date funds ranged from a minus 3.6 percent to minus 41 percent."

What makes target-date funds so crucial is that the Pension Protection Act of 2006 more easily lets employers use the funds as default investments in 401(k) plans.

One flaw with target-date funds is that they're designed for particular age ranges and ignore individual investment risks, said Christopher Jones, chief investment officer at Financial Engines, an investment advisory firm that works with companies and 401(k) participants.

So as you approach your retirement date, check the stocks portion of your target-date fund and make sure you're comfortable with how much risk it's carrying.

"See if it's in your comfort zone," said Michael Henkel, managing director of retirement services at Envestnet Asset Management in Chicago. "That date is a date you use in charting the asset allocation over time so you know when it needs to be at its least risky."

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