Target-date funds are designed to make retirement investing simpler. You choose a fund with a year near your expected retirement date, and the fund gradually changes its asset mix over time. That convenience is useful — but two funds with the same target year can still behave very differently.

The year on the label is not the whole strategy

The Department of Labor notes that target-date funds with the same target date can have different investment strategies, glide paths, fees and performance. One may still hold a relatively high stock allocation near retirement while another becomes more conservative sooner.

Department of Labor target-date fund guidance.

Understand the glide path

The glide path is the schedule for how the fund changes its mix of stocks, bonds and other investments as the target year approaches and passes. Some funds are designed to reach their most conservative allocation at the target date. Others continue changing for years afterward.

Check the actual stock allocation

If you are five years from retirement, the percentage invested in stocks matters more than the year printed in the fund name. Review the current allocation and ask whether you are comfortable with the potential decline that could occur at that risk level.

Review both fund and underlying expenses

Some target-date funds invest in other funds. The Department of Labor specifically recommends reviewing the target-date fund’s fees and, where applicable, the costs of the underlying investments.

Convenience is not the same as personalization

A target-date fund generally does not know whether you have a pension, large cash reserves, rental income, a spouse with a different retirement date, significant debt, or a strong need for guaranteed income. It can be an efficient default, but it is not a personal retirement-income plan.

Questions to ask before relying on one fund

What percentage is currently in stocks, bonds and cash?
How does the allocation change before and after the target year?
What are the fund’s total expenses?
How did it behave during major market declines?
Does the risk level match when I will begin withdrawals?
What dependable income sources will cover essential expenses?

Request a Retirement Income Review

Educational information only. Target-date funds involve investment risk and can lose value, including near or after the target date. King Life does not provide individualized investment-advisory or securities advice.