Target-date funds have their limitations, so it's important to monitor and adjust them accordingly.

• It may be necessary to reassess whether a target-date fund remains suitable at certain times.
• A study reveals that 80% of 401(k) plan participants invest in "set it and forget it" funds.
• Here’s what you need to know.

As you approach retirement, it may be necessary to reassess whether your target-date fund remains suitable for your investment needs.

While these 'set it and forget it' funds can help automate your savings plan by gradually shifting from riskier investments to more conservative options, their effectiveness may change over time based on your individual circumstances.

In your mid-50s, when you're approximately 10 years from retirement, it's crucial to adopt a holistic perspective and examine your entire financial situation, advised Chris Mellone, a certified financial planner and partner with VLP Financial Advisors in Vienna, Virginia.

Mellone stated that a tailored asset allocation strategy is necessary for this group of investors.

According to Morningstar, roughly $1.8 trillion is invested in target-date mutual funds. Vanguard reports that 98% of 401(k) plans include this type of fund in their lineup. Additionally, 80% of all 401(k) participants are invested in these funds.

Target-date funds are a practical option for young investors or those with limited experience, as they have an asset allocation that reflects a long-term retirement horizon (up to 95% in stocks for those in their 20s), and they offer automatic rebalancing and de-risking as time progresses.

That usefulness can change, however.

Charles Sachs, chief investment officer for Kaufman Rossin Wealth in Miami, stated that the downside is that you put it on autopilot for 20 years, and as it grows, you advance in your career and life, and you acquire other assets.

Sachs stated that when the target fund is working independently, it is essential to coordinate.

If your target-date fund is 70% in stocks and 30% in bonds, and you have money in another fund that's invested solely in stocks or a stock index, your stock/bond ratio could be more like 90%/10%, which may not be appropriate for your risk tolerance.

If they add investments to their portfolio, they may not be aware of the additional risk they're taking on, as their allocation may no longer match their expectations, according to Megan Pacholok, an analyst with Morningstar.

With at least some money still invested in stocks, these funds typically reach their target year. However, some may reduce their equity holdings.

Although some advisors suggest that target-date funds are suitable for retirement, others argue that there are reasons to reassess their use.

If you need to move money from one account during a market downturn, you may have to sell stocks, even if you don't want to.

Mellone advised against indiscriminately taking distributions from target-date funds, suggesting instead that it's better to break down the pieces and assess what makes the most sense for funding distributions.

To avoid selling volatile investments in a down market during retirement, it is advisable to plan for a certain number of years' worth of income, such as five years, which would require $500,000 in cash and bonds.

It is advised by experts to periodically reassess whether a target-date fund remains suitable for your financial situation as your life becomes more intricate or you approach retirement.

"Tracking it is crucial to determine whether it's working for or against you, as Sachs advised. Don't neglect it forever," said Sachs.