Target-Date Fund
A retirement fund that automatically shifts from growth to conservative investments as a target retirement year approaches.
What is Target-Date Fund?
A target-date fund (TDF) is a type of mutual fund or ETF that provides a diversified, automatically rebalancing portfolio designed for investors planning to retire in a specific year. The fund begins with a growth-oriented allocation (heavy in equities) and progressively shifts toward more conservative assets (bonds, cash equivalents) as the target date approaches — a process called the 'glide path.' Target-date funds are the default investment option in most 401(k) plans because they require no active management by the investor. However, glide paths vary significantly across fund families, and all-in-one convenience comes with the tradeoff of limited personalization and sometimes higher expense ratios.
Example
A 30-year-old investor selects the Vanguard Target Retirement 2060 Fund in their 401(k). In 2024, the fund holds approximately 90% equities and 10% bonds, reflecting the long horizon. By 2055, the allocation automatically shifts to roughly 50% equities and 50% bonds. By 2065 (5 years past target), it reaches its 'landing point' of about 30% equities and 70% bonds, maintaining that mix for ongoing withdrawals. Vanguard's 2060 fund has an expense ratio of 0.08%.