The fund is built around a planned retirement date

A target retirement fund is usually designed for people expecting to retire around a particular year or period. The fund changes its investment mix as that date gets closer.

Early on, it may hold more growth assets such as shares. Later, it may reduce risk by moving towards more cautious assets, depending on the strategy.

This can be useful for people who want a guided approach without choosing several funds themselves. The fund does some of the risk adjustment automatically.

The weakness is that the target date may not match your real retirement plan. You may retire earlier, later, draw down gradually or keep money invested for many years after retirement.

Before using one

  • Check the target year and investment path.
  • Understand what it holds near retirement.
  • Ask whether it fits your benefit options.
  • Review it if your retirement date changes.
  • Do not assume automatic means personal.