Target-date funds may differ in their investment approach. Target-date funds can be designed to build up savings “to” an individual’s target retirement date, with allocations becoming more conservative at retirement. This approach results in funds adopting higher allocations to fixed income investments at/towards the retirement date, and then a static portfolio thereafter.

Contrary to this approach is the principle of “through” retirement funds. Here, the target-date fund is designed to help investors through retirement, with the goal of accumulating wealth long after the retirement (target) date. Funds adopting this approach may have higher allocations to stocks at the target date, followed by a declining allocation 10 to 30 years post retirement.

It is important to understand that these two approaches may differ vastly in risk and reward trade-off due to the way the fund invests in stock and bond investments over time. The chart below illustrates the difference in allocations to stocks and bonds in both a “to” and “through” approach. Both images display changes in allocation to stocks and bonds over a 40-year period, for example starting in 2011, with a target retirement date of 2031. The “to” approach emphasizes the static glide path while the “through” approach emphasizes a declining glide path.

Retirees face the most risk at the target date, as it marks the start of a period in which savings are needed to fund their retirement. A more aggressive approach (sloping glide path) may improve the chances of preserving retirement savings but is not without the added risk. A conservative approach (static glide path) is designed primarily to build savings. Consult your financial advisor to evaluate a fund that best fits your needs in retirement.


Past performance is no guarantee of future results. Diversification does not eliminate the risk of experiencing investment losses. This is for illustrative purposes only and not indicative of any investment. Government bonds are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. The target date is the approximate date when investors plan to start withdrawing assets. The investment objectives of each fund are adjusted over time to become more conservative as the target date approaches. The principal value of the fund(s) is not guaranteed at any time, including at the target date. Investing in target-date funds always involves risk, including the possibility of losing the entire investment. The allocations used in this example are hypothetical and do not represent any particular investment.

A glide path illustrates an investment’s change in target asset allocation along specific time points as an investor approaches, reaches, and settles into retirement. It graphically depicts how the allocation shifts from a more aggressive investment approach to a more conservative one as the investment nears its target maturity date.

An investment in a target-date fund is not guaranteed, and you may experience losses, including losses near, at, or after the target date. There is no guarantee that the fund will provide adequate income at and through retirement. Consider the investment objectives, risks, charges, and expenses of the fund carefully before investing.

Target-date funds are sold by prospectus, which can be obtained from your financial professional or the company and which contains complete information, including investment objectives, risks, charges and expenses. Investors should read the prospectus and consider this information carefully before investing or sending money.

©Morningstar 2014. All Rights Reserved. Used with permission.