Target Date Funds

A number of companies offer “target date retirement funds,” sometimes referred to as “target date funds” or “lifecycle funds.” Target date funds, which are often mutual funds, hold a mix of stocks, bonds, and other investments. Over time, the mix gradually shifts according to the fund’s investment strategy. Target date funds are designed to be long-term investments for individuals with particular retirement dates in mind. The name of the fund often refers to its target date. For example, you might see funds with names like “Portfolio 2030,” “Retirement Fund 2030,” or “Target 2030″ that are designed for individuals who intend to retire in or near the year 2030. Most target date funds are designed so that the fund’s mix of investments will automatically change in a way that is intended to become more conservative as you approach the target date. Typically, the funds shift over time from a mix with a lot of stock investments in the beginning to a mix weighted more toward bonds. Target date funds are often available through 401(k) plans. Some 401(k) plans use these funds as the default investment for plan participants who have not selected their investments under the plan. Both before and after investing in a target date fund, consider carefully whether the fund is right for you.