Choose target-date funds that auto-adjust with your age

Planning for retirement can feel overwhelming. With so many investment options, it’s easy to wonder if you’re on the right path. Target-date funds offer a solution by automatically adjusting your asset allocation as you age, giving you a simple, hands-off strategy.

Understanding target-date funds

Target-date funds (TDFs), also called life-cycle or target-retirement funds, are mutual funds designed to evolve over time.

Each fund is labeled with a year — for example, a “2050 Fund” — indicating when you plan to retire. These funds are popular in employer-sponsored 401(k) plans and individual retirement accounts.

They blend stocks, bonds, and other assets within a single fund, automatically shifting toward lower-risk investments as you approach your target date.

The glide path explained

The core feature of every target-date fund is its glide path. This defines how the fund transitions its mix of equities and fixed-income assets over time.

Early in your career, the fund holds a high percentage of stocks to maximize growth potential. As you age, it gradually increases its bond and cash allocations to preserve capital and reduce volatility.

This process of gradual change removes the burden of manual rebalancing. Instead of monitoring markets and adjusting your portfolio, the fund’s managers handle the day-to-day shifts in asset mix.

Why choose target-date funds for retirement

Target-date funds simplify the retirement planning process in several key ways:

• Set it and forget it approach – once you pick your target year, the fund handles the rest.
• Built-in diversification – exposure to equities, bonds, and sometimes alternative assets in one package.
• Automatic rebalancing – as markets move, the fund keeps your portfolio aligned with its glide path.
• Low maintenance – ideal for investors who prefer not to manage every detail.

How to select the right target-date fund

Choosing the appropriate fund involves matching your planned retirement year with the fund’s label. Use this simple approach:

Determine your target retirement age and calculate the year (for example, someone born in 1990 aiming to retire at 65 would choose a 2055 fund).

Funds are typically offered in five-year increments (2025, 2030, 2035, etc.). Select the year closest to your expected retirement date.

If you have a higher risk tolerance, consider a fund with a later target date. Conversely, if you prefer conservative growth, choose an earlier date. Always review the fund’s specific glide path and asset mix before committing.

Comparing TDFs to DIY portfolios

For many investors, target-date funds provide advantages over self-managed portfolios. The table below highlights key differences:

Potential drawbacks and considerations

While target-date funds offer convenience, it’s important to be aware of potential downsides:

No guaranteed returns – like all investments, TDFs can decline in value, especially during market downturns.

One-size-fits-all approach – these funds do not account for individual circumstances such as additional income sources, health needs, or other assets.

Fee variations – expense ratios differ among providers, so compare costs before selecting a fund. Even a small difference can compound over decades.

Glide path differences – not all funds follow the same allocation schedule. A 2050 fund from one company might be more conservative or aggressive than another.

Steps to enroll in a target-date fund

• Identify your anticipated retirement year based on your age and retirement goals.
• Review available funds in your retirement plan or brokerage, noting their target dates and glide paths.
• Compare expense ratios and investment mixes to find the best fit.
• Select the fund with the target date closest to your desired retirement year.
• Enroll through your 401(k) plan administrator or brokerage account, allocating your contributions to the chosen fund.
• Periodically review your selection, especially if your career path, risk tolerance, or retirement timeline changes.

Taking action and reviewing progress

Once you’ve enrolled, monitor your retirement account statements annually. Although target-date funds manage themselves, life events can prompt a reassessment of your strategy.

Consider consulting a financial advisor if you experience significant changes, such as:

• Career shifts or income variability
• Major life events (marriage, inheritance, health considerations)
• Changes in retirement goals (delaying or accelerating retirement)

By staying proactive, you ensure your retirement plan evolves alongside your life, maintaining alignment with your objectives.

Embrace a confident path to retirement

Choosing a target-date fund offers peace of mind in your financial journey. As the markets ebb and flow, you can trust that the fund’s glide path will keep you on course.

With billions invested in target-date funds across the United States, these vehicles have proven to be a cornerstone for retirement savers seeking simplicity and diversification.

Empower yourself today by selecting the fund that aligns with your timeline and risk preferences. Let the mechanics of asset allocation work in your favor while you focus on living fully in the present.

Your tomorrow deserves thoughtful planning today. Embrace the automated discipline of target-date funds and stride confidently toward a secure and fulfilling retirement.