Definition
Target-date funds (TDFs) provide a complete retirement portfolio in a single fund. The "glide path" gradually shifts from aggressive (high equity) to conservative (high bonds/cash) as the target retirement year approaches. They are the most popular default option in 401(k) plans. Differences between TDF families include equity allocation at the target date and how quickly the glide path declines.
lightbulb Example
A Target 2050 fund for someone retiring around 2050: currently holds 90% stocks/10% bonds. By 2040, it shifts to 70/30. By 2050, it reaches 50/50. By 2060, it settles at 30/70 in a "through" glide path.
verified_user Key Points
- Automatic asset allocation adjustment over time
- Most popular 401(k) default option
- "To" funds reach final allocation at retirement
- Glide path design varies significantly between providers