4 Popular Target Date Fund Choices
Target date funds do the work of investing for you by creating an age-appropriate asset allocation and ongoing management for a low fee. If you have a 401(k) plan, within your plan you may see target date funds offered by the companies below. All are solid choices you can feel confident with.
If you are choosing your own target date fund, visit the websites below and compare fees, the ease with which you can find information on their websites, and call their customer service line to see if you feel they provide a level of responsiveness that you will be happy with.
T. Rowe Price
T. Rowe Price has a fun interactive online tool that helps you find the right target-date fund for you, ranging from a target retirement date of 2005 to 2060. Their "Retirement 2025" fund has an annual expense of 0.71%.
T. Rowe Price says:
Whether you're investing for retirement or living in retirement, it's important to maintain an age-appropriate asset allocation of stocks and bonds.
You can search through Vanguard's Target Date funds by age or by years to retirement. For example, for those currently between the ages of 59 and 63 (as of 2016) they recommend their 2020 fund, which has annual expenses of .14%.
Vanguard is known to have some of the lowest fees in the industry; the annual expenses on their funds are approximately one-fourth the industry average.
In their case low fees does not mean low quality. Here's what they say about their target date funds:
- Less risk through broader diversification
- A professionally managed asset mix
- Automatic rebalancing
- Low costs
Fidelity Freedom Target Funds have target dates ranging from 2020 to 2060. They describe their 2025 fund as appropriate for someone planning to retire within a few years of 2025. It has an expense ratio of .23% (less than 1%).
Fidelity Freedom Funds offer 13 target date funds based on expected year of retirement. You don't need to adjust your asset allocation over time because Fidelity Freedom Funds become more conservative the closer you get to retirement.
Schwab Target Funds have target dates ranging from 2020 to 2060. They describe their 2025 fund as appropriate for someone planning to retire between 2023 and 2027. It has an expense ratio of .65% (less than 1%).
Funds are professionally managed according to your approximate target date for retirement. Each target fund has its own investment objective and automatically adjusts its asset allocation to meet your changing financial needs over time. The Funds are built with the expectation that you will start gradual withdrawals of fund assets on the target date, to begin covering expenses in retirement.