All-in-one retirement funds automatically adjusting stock/bond ratio as target retirement year approaches. Example: Vanguard Target Retirement 2050 starts 90% stocks / 10% bonds, gradually shifts to 50/50 by 2050. Became default 401k option for millions after Pension Protection Act (2006).
Why They’re Popular
2023: You’re 30, retiring around 2055:
- Pick Target Date 2055 Fund
- Fund is aggressive (90% stocks)
- Automatically rebalances and becomes conservative as you age
- No decisions needed for 30 years
“Perfect for people who don’t want to think about investing” — effectively a robo-advisor within 401k.
The Glide Path Debate
“To retirement” funds: Reach conservative allocation (e.g., 50/50) at retirement year
”Through retirement” funds: Continue adjusting post-retirement (may stay 60% stocks at 65)
2008 crash revealed problem: Workers retiring in 2010 saw Target Date 2010 funds lose 25-40% right before retirement—not conservative enough. Vanguard switched to more conservative glide paths.
Fees Matter
- Vanguard TDFs: 0.08% expense ratio (cheap)
- Many 401k TDFs: 0.5-1.0% (eats significant returns over 30 years)
r/Bogleheads often recommends building your own “three-fund portfolio” instead to save fees, but acknowledges TDFs serve important role for truly hands-off investors.
Sources:
- Vanguard Target Retirement series
- Morningstar TDF research
- r/Bogleheads TDF vs. DIY debate threads