Understanding Target Date Funds

Key Takeaway

Target Date Funds are mutual funds that include a diversified mix of stock, bond, cash, and specialty funds. They offer a solution for retirement plan investors looking for help in making investment decisions. The funds are professionally managed to become more conservative over time and help minimize risk as you get closer to retirement.

Who Should Consider Using Target Date Funds?

Participants new to investing or those without the time to research and monitor funds may find Target Date Funds an appealing option. Target Date Funds give participants a simple alternative yet still ensure investments are suitable and well diversified.

Target Date Funds are a great option for many participants, but potential investors should make sure to read the fund fact sheet and/or fund prospectus to be fully informed of the fund’s details and management.

Why Use Target Date Funds?

Many plan participants understand the need for diversification but are unsure what funds to choose. They may struggle with decisions such as: Which funds suit my age and time frame? How many funds should I choose? How often should I change my funds or allocations? The Target Date Fund manager makes these decisions based on an anticipated retirement date.

The only decision participants need make is determining which fund is closest to their desired retirement date. The fund manager takes care of the rest by changing the investment mix over time (less stock, more bonds) and adding investment types more suitable to those approaching retirement.

How Do I Know What Fund To Select?

Target Date funds align with the year you intend to retire.

When Should I Consider Moving Assets?

While Target Date Funds are designed with the average investor in mind, they are not a one-size-fits-all program. There are instances when personal goals or needs may not align with a Target Date Fund. As life milestones are reached, our perspectives and needs change. Investment goals may need to change as well. This is why it is important to review investment choices and retirement goals periodically.

Changes can be made at any time by logging into your account.