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Four basics to understanding target date funds

Target date funds offer a convenient, long-term solution for retirement savings. Rather than research and select individual investments, you can choose a single fund based on your retirement date or the date you plan to start withdrawing your funds.

Here are four things to know:

1 Diversified

The funds, which are are made up of multiple asset classes, offer the benefit of diversification within a single fund.1

2 Professionally managed

Experienced asset managers select strategies, construct your portfolio, rebalance your investments and monitor performance.

3 Convenient

The date in a target date fund’s name stands for an approximate date when an investor is expected to retire or start withdrawing money.

4 Automatic

The funds are adjusted over time to become more conservative as your target date approaches. The mix of investments and risk can vary for different series of target date funds. Most are managed with a to-retirement or through-retirement strategy. Remember, regardless of the investments you choose, you should continue to monitor your accounts at least annually to ensure your investments continue to meet your investment objectives.

To retirement and through retirement: What’s the difference?

When funds are managed with a to-retirement strategy, they reach their most conservative mix at the target date. They remain fixed at that allocation throughout retirement.

graph showing three type of fund options for to retirement strategy based against years until retirement

When funds are managed with a through-retirement strategy, they continue to adjust beyond the target date. These types of target date funds will continue to be automatically adjusted to a more conservative mix for a set number of years after the target date.

graph showing three type of fund options for through retirement strategy based against years until retirement

As with all investments, the principal value of the fund(s) is not guaranteed at any time, including at the target date.

Key takeaway

People who consider target date funds often don’t have the time or interest to choose their investments. In three steps, find out your investor type.

Helpful resources

The date in the name of the target date fund is the assumed date of retirement. The asset allocation becomes more conservative as the fund nears the target retirement date; however, the principal value of the fund is never guaranteed.

1 Diversification does not ensure a profit and does not protect against loss in declining markets. Asset allocation funds are generally subject to a fund operating expense at the fund level, as well as prorated fund operating expenses of each underlying fund in which they invest. For more information, see the fund prospectus and/or disclosure document.

This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.