Target Date Funds — Set It and Forget It

Overview

Target date funds automatically shift from aggressive (stocks) to conservative (bonds) as you approach your target retirement year. They're the ultimate hands-off investment. See how they compare to building your own mix in our ETFs vs index funds comparison, and learn more about dividends generated along the glide path. If you prefer a DIY retirement approach, check out alternative IRA options for greater control over your asset allocation.

Key Takeaways

• Choose the fund closest to your retirement year (e.g., 2055 fund if retiring around 2055).
• Glide path: starts 90% stock → gradually shifts to 30-50% stock by retirement.
• Expense ratios vary widely: Vanguard ~0.08%, Fidelity Index ~0.12%, brand-name active ~0.60%+.
• One fund = done. It holds US stocks, international stocks, US bonds, international bonds.

Practical Tips

• In 401(k) plans, target date funds are often the best option if low-cost index versions are available.
• If your plan has expensive target date funds (>0.40%), you can replicate the allocation with cheaper index funds.
• Beyond-target date: some funds continue de-risking 10-15 years past the target year.