Target-date funds offer a hands-off approach to retirement investing by automatically adjusting asset allocations over time. These funds balance growth and security by shifting from stock-heavy portfolios in early years to safer investments like bonds as retirement nears.
Named for the investor’s target retirement year, these funds simplify decision-making and are commonly found in employer-sponsored 401(k) plans. A key factor in choosing one is its “glide path,” which determines whether asset adjustments stop at retirement or continue for years beyond.
While convenient, investors should compare expense ratios and investment strategies to ensure alignment with their risk tolerance. Three TDF funds to consider are:
- Vanguard Target Retirement 2045 Fund Investor Shares (VTIVX) – Expense Ratio: 0.08%
- Fidelity Freedom Index 2045 Fund Investor Class (FIOFX) – Expense Ratio: 0.12%
- T. Rowe Price Retirement 2045 Fund (TRRKX) – Expense Ratio: 0.62%
Finsum: Despite their “set it and forget it” appeal, periodic reviews help maintain a well-balanced portfolio.