"On Target" for Retirement

Your employer's retirement plan may offer the option to contribute to a target date fund.* Target date funds feature an investment mix that becomes more conservative over time, reducing risk as retirement gets closer.

How They Work

You invest by choosing a fund with a target year that's closest to the year you expect to retire. The gradual shift to more conservative investments, or "glide path," can vary significantly from fund to fund. Some funds take an investor up to retirement, after which the fund's asset allocation never changes; other funds continue through the target year and may not reach their most conservative allocation until the investor is past retirement age. Before you invest, determine whether the fund's glide path is appropriate for your circumstances, since it will likely affect the fund's risk and performance.

What's in Them?

Target date funds often hold other mutual funds in their portfolios, although they may also invest directly in individual stocks and bonds. Benefits of investing in the fund include automatic rebalancing and a diversified portfolio. Target date funds are designed to be stand-alone investments. If you decide to add other investments to your portfolio, make sure the overall asset allocation doesn't present more risk than you're comfortable taking.

Fund Selection

In addition to choosing a fund that reflects your anticipated retirement year, consider the fund's investment strategies and your own risk tolerance. While target date funds are designed to help you achieve your goals, your contributions, the fund's performance, and other sources of retirement income will be important factors.

As with any investment, check the fund's fees and expenses, and talk with your financial professional before you invest.

*Investors should consider the investment objectives, risks, charges, and expenses of the fund carefully before investing. Contact the issuing firm to obtain a prospectus, which should be read carefully before investing or sending money. Because mutual fund values fluctuate, redeemed shares may be worth more or less than their original value. Past performance won't guarantee future results. An investment in mutual funds may result in the loss of principal.