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Target-Date Funds

The plain answer

Section titled “The plain answer”

A target-date fund is a diversified retirement portfolio in one fund. You choose a fund with a year near when you expect to retire, and the fund manages the mix of stocks and bonds for you.

It starts with more stocks when retirement is far away and usually becomes more conservative over time. This planned shift is called a glide path.

How it actually works

Section titled “How it actually works”

The fund holds other stock and bond funds, then rebalances them automatically. Its glide path gradually reduces stock exposure and increases bond exposure as the target year approaches. Some funds continue changing after the target date, while others settle near that date.

Funds with the same target year can follow different glide paths. They may hold different stock percentages, international allocations, bond types, or cash positions. The year on the label is a starting point, not proof that the risk level fits you.

What this means for you

Section titled “What this means for you”

A target-date fund can be a strong one-fund choice when you want broad diversification, automatic rebalancing, and a risk level that changes over time. Review its current allocation and glide path against your needs using the ideas in asset allocation.

Fees still matter. Compare the fund’s expense ratio with similar target-date funds and with the cost of building a portfolio from individual index funds. Even modest annual costs compound over a long investing period. See why fees matter.

In a workplace plan, your menu may offer one target-date series with several retirement years. Choosing funds in your 401(k) explains how to evaluate the available choices.

Common mistakes

Section titled “Common mistakes”
  • Choosing a target year without checking the fund’s current stock and bond mix.
  • Holding a target-date fund alongside several other funds and accidentally changing its intended allocation.
  • Assuming every fund with the same target year has the same glide path or risk.
  • Ignoring the expense ratio because the fund handles allocation and rebalancing.
  • Switching to a later target year only to chase stronger recent returns.
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Educational content, not personalized financial, tax, or legal advice. No affiliate relationships. Figures are for tax year 2026 and change annually.Read the full disclaimer.