Target-date funds have become one of the most popular investment options in workplace retirement plans. Designed to simplify investing, these funds automatically adjust a specific mix of stocks, bonds and other assets as an investor approaches retirement.

For retirement plan sponsors and participants, here’s what to know about how target-date funds work and the role they play in retirement planning.

How Target-Date Funds Work

A target-date fund is built around an expected retirement year, with the fund’s mix of investments designed to become more conservative as the date approaches. For example, someone planning to retire in or near 2045 may invest in a 2045 target-date fund. Today, the fund may focus more on growth-oriented assets like stocks, but as the calendar nears 2045, the mix of investments would change to include more conservative assets like bonds.

This process, known as the glide path, is intended to reduce risk over time without requiring the investor to manually manage adjustments to the fund.

Benefits of Target‑Date Funds

For many investors, target-date funds offer several major advantages:

• Simplicity: One decision helps keep your retirement account on track over time.
• Diversification: The fund spreads investments across asset classes.
• Professional management: Experts adjust allocations based on market research and long‑term expectations.
• Behavioral advantages: Automation helps participants stay invested and avoid emotional decisions.
   

Considerations and Potential Drawbacks

Despite their benefits, target-date funds are not one‑size‑fits‑all and, like any investment, are not without risks. Key considerations include:

• Mismatch with personal risk tolerance: Some investors may find the fund too aggressive or too conservative.
• Retirement timing flexibility: Participants planning to retire earlier or later than the fund’s target date may need to adjust accordingly.
• No guarantee of safety: Even near retirement, target-date funds still carry market risk and can experience losses.
   

Contact Us to Learn More

Bell Bank Wealth Management’s retirement plan services team offers a range of target-date funds for retirement plan sponsors and participants. If you are interested in learning more about how target-date funds work, contact our retirement plan services team today.

This article was published in the Q2 2026 issue of the Bell Wealth newsletter.