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Conventional wisdom often points to target-date funds (TDFs) as a straightforward solution for retirement savings. However, a recent study indicates a notable shift in preference among affluent investors as they approach retirement. The 2025 Retirement Survey by Allspring Global Investments found that a substantial 84% of wealthy investors, those with at least $200,000 in household investable assets, opt for other investment avenues rather than relying solely on TDFs. This divergence suggests that as individuals accumulate more wealth and draw closer to their retirement years, the generalized, set-it-and-forget-it nature of TDFs becomes less appealing, replaced by a desire for more nuanced and personalized financial strategies.

Target-date funds are designed to simplify retirement planning by automatically adjusting asset allocation, shifting from higher-risk investments to more conservative ones as the target retirement date nears. While this 'one-size-fits-all' approach can be highly beneficial for younger investors, providing a hands-off method to save, it appears to lose its luster for those with greater financial resources and more complex financial pictures. These wealthier individuals often find that their unique circumstances, particularly concerning tax management and diversified asset portfolios, are not adequately addressed by the standardized structure of TDFs.

Nate Miles, head of retirement at Allspring, highlights that affluent individuals nearing retirement often face distinct financial challenges that differ significantly from the typical investor profile for whom TDFs are primarily designed. A prime example is tax management. Many high-income earners, especially W-2 employees, are accustomed to taxes being automatically deducted from their paychecks throughout their careers. Consequently, they may not have actively managed their tax burden beyond basic deductions. Upon retirement, this can lead to an unexpected complexity: navigating which accounts to withdraw from to minimize tax liabilities.

The survey underscores this point, revealing that only 53% of retirees prioritize tax status in their withdrawal decisions, despite the fact that a strategically planned, tax-efficient withdrawal strategy can profoundly influence long-term retirement outcomes. This lack of active tax planning knowledge, coupled with the automated nature of TDFs, can leave wealthier retirees unprepared for critical financial decisions. The sheer number of choices—from determining monthly or annual income needs based on life expectancy and investment returns, to deciding the optimal sequence of drawing from taxable, tax-deferred, and tax-exempt accounts—can be overwhelming.

Miles emphasizes that as individuals age and their financial portfolios grow, their personal circumstances and financial goals become increasingly distinct. This growing individuality necessitates retirement strategies that are tailored to their specific needs, rather than generic models. The varied financial situations of each investor mean that a universal approach, while convenient, ultimately falls short in optimizing their retirement outcomes.

For those approaching or in retirement, Miles suggests adopting strategies employed by wealthier investors to navigate their financial journey more effectively. This involves a more active and informed approach to managing retirement funds. Key recommendations include prioritizing withdrawals from taxable accounts first, allowing tax-deferred and tax-free savings to continue growing. Considering a Roth conversion is another astute move, as transferring funds from a traditional IRA to a Roth IRA now could lead to significant tax savings in the future. Additionally, meticulously planning the order of withdrawals from different account types is crucial; making an ill-informed decision can result in substantial and avoidable tax expenses.

For individuals still years away from retirement, the playbook of affluent investors offers valuable lessons in proactive financial management. It's advisable to maximize contributions across a variety of account types beyond just a 401(k), exploring options like backdoor Roth IRAs, Health Savings Accounts (HSAs), and even taxable brokerage accounts. Moreover, diversifying investments beyond traditional stocks and bonds is crucial. Wealthier investors often blend tax-efficient holdings such as index funds and exchange-traded funds with alternative investments like real estate investment trusts (REITs) and actively managed funds. This blended approach aims to balance growth potential with strategic tax planning, ensuring a robust and flexible retirement portfolio.