What Is a Target Date Fund?

A target date fund is an investment portfolio specifically designed to adjust as you age, making it easier to plan for retirement. These funds are popular in retirement plans because they are structured to automatically reduce risk as your target retirement date approaches.

The Strategy Behind Target Date Funds

Early in your career, a target date fund will invest more heavily in stocks. This is a higher-risk, higher-reward strategy aimed at growing your investments over the long term.

As you get closer to retirement, the fund gradually shifts your money into more conservative investments like bonds, money market accounts, and other low-risk options. This is to help protect your savings when you have less time to recover from market downturns.

What Is a Glide Path?

The way your investments shift over time in a target date fund is called a glide path.
This glide path is usually illustrated as a graph that shows how the fund’s allocation to stocks decreases while safer investments increase over time.

Choosing the Right Fund Year

The year listed in a target date fund’s name represents the year you plan to retire.
For example, if you’re planning to retire around the year 2050, you would likely choose a 2050 Target Date Fund. These funds are often available in five-year increments (e.g., 2045, 2050, 2055).

“To” vs. “Through” Retirement Funds

There are two primary types of target date funds:

• To Retirement Funds: These funds are designed to become most conservative usually around age 67

• Through Retirement Funds: These continue adjusting even after you retire, becoming most conservative around age 85, based on average life expectancy.

Each type has a different glide path, so your preference depends on whether you want more growth potential after retirement or more stability right at retirement age.

Why Are They Popular in Retirement Plans?

Target date funds are commonly used in employer-sponsored retirement plans and are often the Qualified Default Investment Alternative (QDIA).
This means that if you don’t actively choose where to invest your retirement money, your employer may automatically place it in a target date fund that aligns with your expected retirement age.

The Set-It-and-Forget-It Advantage

Many retirement plan participants choose investments once but don’t adjust them over time. Target date funds are ideal for these investors because they automatically rebalance over time based on your age and risk tolerance.

However, that doesn’t mean you should ignore your retirement plan entirely. It’s important to:

• Research your plan options

• Compare fees and costs

• Make sure the fund matches your risk tolerance and retirement goals

Final Thoughts: Investing Made Simple

Target date funds take the guesswork out of retirement investing. With automatic rebalancing, age-based adjustments, and a clearly defined timeline, they’re truly one of the easiest ways to invest for retirement, especially for those who want a “set it and forget it” solution. While no investment is entirely hands-off, target date funds offer a smart starting point for anyone looking to build a secure financial future with minimal complexity.

It may also be beneficial to consult with a financial advisor to ensure your investment choices align with your personal financial goals.