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  • Retirement Plans
  • Tiered Investment Choices
  • Target Date Funds

Target Date Funds: A Simplified Investment Approach

Researching all of a plan’s investment options may be more than you want to tackle. You may want to consider a simplified approach by investing in a Target Date Fund (also called an Asset Allocation or Lifecycle Fund). The Vanguard Institutional Target Retirement Date Fund series is listed in Tier 1 and is available at Fidelity, TIAA, VALIC and Vanguard.

How Do They Work?

Target date funds make investing for retirement more convenient by automatically changing your investment mix or asset allocation over time. Once you select a target date fund, the managers of the fund make all the decisions about asset allocation, making the asset allocation mix more conservative as you near the target date (usually your retirement date).

Target Date Funds

 

What are the Primary Benefits?

With Target Date Funds, you enjoy broad diversification and ongoing professional management. Target date funds are automatically reallocated and rebalanced, implementing the kinds of decisions we all mean to make over our working career, but often don't. However, it is still important for you to periodically review your investment portfolio to determine whether the fund fits your financial situation.

Choosing a Target Date Fund

The target date in the name of the fund is a useful starting point in selecting a fund, but you should not rely solely on the date when choosing a fund or deciding to remain invested in one. Information about the funds is available in the funds' prospectus. Issues to consider include:

  • Understanding the strategy and risks of the fund, as well as the risks of the underlying mutual funds held as investments.
  • Finding out the fund’s performance and fees.
  • Learning how the investments will change over time and when the fund will reach its most conservative mix.
  • Taking into account when you plan to withdraw the money and whether the fund’s investment mix on and after the target date fit with your plans for the future.

Should You Monitor Your Target Date Fund?

Yes. Even though the fund automatically rebalances, it is important to monitor the fund’s investments over time to ensure it is meeting your needs. Target date funds are long-term investments. They do not guarantee that you will have sufficient retirement income at the target date and it is important to note that even though the investment mix is more conservative as you reach the target or retirement date, a percentage of the assets are still invested in stocks which are subject to the ups and downs of the market like any other investment.

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Human Resources

Duke Human Resources
705 Broad St. Box 90496
Durham, NC 27705
Phone: (919) 684-5600
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