How can target-date investments help me?

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Looking for an easier way to save? Find out why target-date investments have become a popular way to save for retirement in employer plans.

They can help you handle investment selection

A target-date investment helps simplify investment selection, which can save you time and effort.

Investment mixes ready to go

A target-date investment contains a collection of mutual funds that create a broadly diversified mix of stocks and bonds. So you can pick just one option and be done with selecting investments. The target-date investment serves as a complete portfolio.

Simple to choose

Each target-date investment has a year in its name, the target date. The investment is designed for people planning to retire and leave the workforce in or around that year. To find a target-date investment that might work for you, simply ask yourself when you want to retire. If you’re not sure, you can add 67* to your birth year. Then take a look at the target-date investment closest to that year.

Target-date investments are subject to the risks of their underlying funds. The year in the investment name refers to the approximate year (the target date) when an investor would retire and leave the workforce. The investment will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. A target-date investment is not guaranteed at any time, including on or after the target date.

You can adjust if necessary

You don’t have to choose the investment that matches your expected retirement year. A target-date investment is designed for a particular retirement year, not a particular person. It doesn’t account for your personal finances and tolerance for risk. You can choose one with a later target date if you prefer a more aggressive investment mix. Or, if you prefer a more conservative mix, you can choose an investment with an earlier target date.

Also, you’re never locked into a particular target-date investment. In fact, if you invest in one, we encourage you to check your investment mix from time to time to make sure it’s in line with your goals and tolerance for risk, especially if your planned retirement year changes.

*Full Social Security retirement age for workers born in 1960 or later. If you were born earlier, full retirement age is 65 to 66, depending on your birth year.

They can serve you for the long run

A single target-date investment can work for you throughout both your career and retirement.

Risk reduces over time

Experts generally recommend reducing investment risk as you approach retirement. The sooner you plan to spend the money, the less time you have to recover from losses in the market. A target-date investment handles this process for you. It will hold more stocks the further it is from its target date, seeking the high potential growth of stocks. As the target date approaches, the investment gradually decreases its stock holdings and increases its bond holdings. Bonds usually have a lower risk of loss, though they also have lower potential gains.

Automatic adjustments

A target-date investment also handles most regular account maintenance for you. If the investment’s mix of stocks and bonds is thrown off by the market, it will automatically adjust to keep you on course.

The target date is not the end

Nothing special happens when a target-date investment reaches the year in its name. With a Vanguard target-date investment, this is the year when it reaches a 50-50 stock-bond mix. Over the next seven years, it gradually becomes more conservative, shifting from stocks to bonds until it lands on a 30% stock, 70% bond mix, which may be right for most investors living in retirement.

Remember, each investment is designed to take you through retirement, which could last 30 years or more. A target-date investment will always keep a portion of its assets in stocks. While continuing to invest in stocks does come with market risk, the long-term growth potential of stocks can help your buying power keep up with inflation during a long retirement.

YOU MAY HAVE OPTIONS IN RETIREMENT

If your retirement plan offers Vanguard Target Retirement Income and Growth Trust, you’ll have another investment option for your savings once you retire. Answer three questions to determine which investment best aligns with your goals.

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They can help simplify investing

Target-date investments are easy to choose, offer broad diversification, and automatically become more conservative over time. Although target-date investments can do a lot of the work for you, you still have an important role to play.

Diversifying means having different types of investments. It doesn’t guarantee you’ll make a profit or that you won’t lose money.

Check your investments regularly

As your risk tolerance and goals change, make sure the fund you're invested in still works best for you. Your personal situation could change—you might decide to retire earlier or later than you planned—and this may lead to switching to a target-date investment that invests more in stocks or more in bonds.

Remember, you’re never locked into a particular target-date investment.

GET HELP WITH CHOOSING INVESTMENTS—AND MORE

If your retirement plan offers advice, turn to our pros. They can select your funds, invest your money, and help you live your best financial life.

See my advice options

Video: "Target Date Investments: How to Pick One"

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Video: "Target Date Investments: What Happens on the Target Date"

Whenever you invest, there's a chance you could lose the money. Bond funds are made up of IOUs, primarily from companies or governments. These funds risk losing value if the debt isn't repaid on time. Also, bond prices can drop when interest rates rise or the issuer's reputation suffers.