When it comes to investment products, target date funds (TDFs) can seem like the simple and safe “set it and forget it” option. For some that may be true, but if not used correctly they can be working against you.

Sometimes called “life cycle funds,” a target date fund is a fund that holds a mix of stock, bonds, and other investments. They are designed to be long-term investments for a future target retirement date.

Anybody can invest in a TDF, but they are generally most effective for younger investors and those who have less complex financial needs.

Generally speaking, the farther away a TDF is from its target date, the higher the ratio of stocks it holds. And as it gets closer to its target date, the fund automatically shifts more towards bonds.

Our research shows us that people who eventually decide to move away from TDFs are looking to:1

  • Diversify their investments
  • Personalize their portfolios
  • Get investment help from an advisor

Most people who have TDFs allocate money into additional funds, to try to achieve greater diversification or more personalized risk levels. But remember, a TDF is already diversified, and using one for only part of your retirement assets can result in lower returns. 

Talk to an Advisor

Our advisors are happy to speak with you to make sure your TDF is working for you and answer any other questions you have. We can help:

  • Evaluate and make recommendations on the investments in your plan
  • Help you think about how much to save
  • Look ahead at your retirement goals to see if you’re on track


1 Not so simple: Why target-date funds are widely misused by retirement investors, March 2016. Available at https://financialengines.com/~/media/files/financial-engines-tdf-report-022916.pdf
2 Aon Hewitt and Financial Engines joint research, Help in Defined Contribution Plans: 2006 Through 2012, May 2014. To show the returns impact, the potential outcomes were compared of a participant fully invested in a target date fund versus a participant partially invested in a target date fund after 20 years, where each invests a lump sum of $10,000 at age 45. For a complete copy of the research study at https://financialengines.com/~/media/files/financial-engines-tdf-report-022916.pdf