Target-Date Funds: A Potentially Smarter Way to Invest for Retirement
Target-date funds offer a professionally managed, diversified investment that automatically adjusts as you move toward and through retirement—so you can focus on living, not rebalancing.
Key Takeaways
- Pick the fund closest to the year you plan to retire
- Your investment mix adjusts automatically over time
- Professionally managed diversification across stocks and bonds
- Designed for long-term retirement savings—one fund, one decision
What Are Target-Date Funds?
One fund. One decision. Decades of professional management.
A target-date fund (TDF) is an investment fund designed to simplify retirement saving. You choose the fund with a date closest to the year you expect to retire—for example, a 2055 fund if you plan to retire around 2055—and the fund's managers do the rest.
Inside that single fund is a diversified mix of investments, typically including domestic and international stocks, bonds and other asset classes. This blend is calibrated to the amount of risk that's appropriate for your stage of life. When you're younger and retirement is decades away, the fund holds more stocks for growth potential. As your target date approaches, the fund gradually shifts toward more conservative investments like bonds and short-term reserves.
This automatic adjustment is managed by experienced portfolio professionals who monitor markets and rebalance the fund on your behalf—freeing you from the complexity of ongoing investment decisions.
Why investors are choosing target-date funds
Target-date funds have become one of the most popular retirement investment vehicles in the United States, and for good reason. They are frequently used as the default investment option in 401(k) plans because they address the two biggest challenges individual investors face: building a properly diversified portfolio and knowing when and how to adjust it.
For investors who lack the time or expertise to actively manage a multi-asset portfolio—or who simply prefer a professionally managed approach—TDFs provide a compelling, all-in-one solution.
Whether you're just starting your career or approaching retirement, a target-date fund can serve as the foundation of a disciplined, long-term savings strategy.
Why Consider a Target-Date Fund
Target-date funds address the most common challenges facing retirement investors through a combination of professional management, diversification, and automatic risk adjustment.
Experienced portfolio managers make the investment decisions for you—selecting securities, rebalancing allocations, and responding to changing market conditions on an ongoing basis.
Each fund contains a broadly diversified mix of asset classes—including domestic stocks, international equities, bonds, and potentially real assets—designed to help smooth returns and manage risk across market cycles.
With a single investment selection, you gain access to a complete retirement portfolio. There's no need to research individual funds, calculate allocations, or manually rebalance your holdings over time.
The fund's asset allocation evolves over time through a professionally designed "glide path," gradually reducing equity exposure and increasing fixed-income holdings as retirement approaches.
Understanding the Glide Path
The glide path is the investment roadmap that guides how your fund's asset allocation shifts over time—from growth-oriented to more conservative—as your target retirement date approaches.
Illustrative Target-Date Fund Glide Path
How to Choose a Target-Date Fund
Selecting the right target-date fund is straightforward. Follow these four steps to find the fund that aligns with your retirement timeline.
Estimate Your Retirement Year
Consider the year you expect to retire. Many investors use age 65 as a starting point, but your target year should reflect your personal plans and financial situation.
Match the Fund Date
Select the target-date fund with the year closest to your expected retirement. For example, if you plan to retire in 2052, a 2050 or 2055 fund may be appropriate.
Understand the Strategy
Review the fund's glide path, underlying holdings, and investment philosophy. Different providers may take different approaches to asset allocation and risk management.
Invest and Stay the Course
Once you've selected your fund, contribute regularly and allow the professional management to work over time. The fund adjusts automatically—no ongoing action required from you.
Which Target-Date Fund Is Right for You?
See examples of investors at different life stages and the target-date funds that align with their retirement timelines.
Age 28 (Born 1998)
Just starting her career in tech. Has nearly 40 years until retirement, assuming a retirement age around 67.
Recommended Fund: 2065
With decades ahead, Emma’s target retirement fund is designed to emphasize long‑term growth and gradually become more conservative over time.
Age 55 (Born 1971)
A senior executive approaching retirement within the next decade.
Recommended Fund: 2035
As retirement draws nearer, David’s fund is shifting toward a more conservative allocation to help manage risk and protect accumulated savings.
Age 45 (Born 1981)
A mid‑career manager with two teenage children. Approximately 20+ years away from retirement.
Recommended Fund: 2045
Sarah’s fund is positioned for the critical mid‑career phase, combining continued growth opportunities with an increasing focus on portfolio stability.
Age 35 (Born 1991)
An established professional, recently married. Planning for retirement in roughly 30+ years.
Recommended Fund: 2055
Marcus’s fund balances growth potential today with a glide path that steadily reduces risk as he moves closer to retirement.
Age 63 (Born 1963)
Approaching retirement and beginning to plan for the transition from saving to spending.
Recommended Fund: 2025
Linda’s fund features a conservative allocation intended to support income needs while seeking to preserve capital during the transition into retirement.
Age 70 (Born 1956)
Retired and drawing income from his portfolio, with a focus on preservation and income.
Recommended Fund: Income
For investors evaluating “through‑retirement” strategies, Robert may remain invested in a near‑dated target retirement fund (such as 2020) that continues to evolve post‑retirement. Alternatively, some investors choose a dedicated target retirement income fund designed specifically to support ongoing income needs with an emphasis on capital preservation.
Note: These examples assume a retirement age of approximately 67, which aligns with the Social Security full retirement age for many investors. Your actual retirement date may vary based on your personal circumstances and financial goals. When selecting a target‑date fund, consider the fund with the year closest to when you expect to begin retirement.
Your Target-Date Fund Questions, Answered
How do target-date funds adjust risk over time?
How do I choose the right target-date fund?
What are the best target-date funds for retirement planning?
Are target-date funds available in tax-advantaged accounts?
How do target-date funds simplify retirement investing?
What happens to a target-date fund after the target date is reached?
Do target-date funds guarantee retirement income?
What is a Collective Investment Trust (CIT)?
Franklin Templeton offers resources and guidance to help you navigate every stage of your retirement journey—from building savings to generating retirement income.
Important Information
All investments involve risk, including possible loss of principal.
Please see each product's web page for specific details regarding investment objective, risks, performance, and other important information. Review this information carefully before you make any investment decision.
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.
Franklin Templeton does not provide legal or tax advice. Retirement plans are complex, and the federal and state laws or regulations on which they are based vary for each type of plan and are subject to change. Franklin Distributors, LLC (FD, LLC) cannot guarantee that such information is accurate, complete or timely, and disclaims any liability arising out of your use of, or any tax portion taken in reliance on such information.