There's no getting around it—if you opt to receive Social Security before you reach full retirement age, the amount of benefit you receive is permanently reduced. More specifically, the reduction translates to 5/9 of 1 percent for every month you retire early—6.67 percent for every year.

A complete life expectancy table can be found online at www.ssa.gov/OACT/STATS/table4c6.html.

To gauge this, look for the fund's tax-adjusted return. This lays out just how much a fund earns after taxes. Another gauge is a fund's tax efficiency ratio. This ratio is figured by dividing after-tax returns by pretax returns. The scale generally runs from 100, which represents the greatest tax efficiency, on down. A solid tax efficiency benchmark is 90 percent.

Twenty or more years to retirement. As a rule, this is when you can afford to be most aggressive. That means heavily weighted with stocks; go with the more aggressive stock funds we mentioned earlier in this chapter. You have the time to ride out corrections and open yourself up to significant long-term growth potential. At the least, consider a fund—or mix of funds—that's at least 80 percent stock heavy.
Ten to 20 years to go. Here, you should be a bit less aggressive. Look for a mix of roughly 65 percent stocks, with the remaining 35 percent divvied between bonds and cash (say, 25 percent bonds, 10 percent cash). The thinking here is that you still want to be somewhat aggressive in terms of growth, but not so aggressive as a longer time frame might comfortably afford.
Less than 10 years to go. Here, preservation of what you've accumulated is more important than growth. Look for 40 percent stocks, 40 percent bonds, and 20 percent cash.

These funds can be suited to someone on the verge of retiring—10 or so years off—who wants to play it safe but doesn't want to sacrifice all potential for growth.

—in reference to growth and income funds