How Do Target Date Funds Work? Glide Paths, Fees And Risks
Thursday, November 12, 2026
Key Points
A target date fund is one fund, built from other funds, that shifts money from stocks to bonds on a set schedule called a glide path.
Funds with the same year can hold very different mixes. At the target date, BlackRock LifePath Index holds 40% stocks, Vanguard holds 50% and T. Rowe Price Retirement holds 55%.
Fees compound. On $500 a month for 30 years at a 7% return, a 0.63% fund ends about $55,700 behind a 0.08% fund.
A target date fund invests your retirement savings in a mix of stock and bond funds, then shifts that mix toward bonds as the year in its name gets closer. You pick one fund based on when you plan to retire, and the fund handles the asset allocation and rebalancing for you.
Most workers already own one. Vanguard’s How America Saves 2026 (PDF File) report found 84% of participants used target date funds when their plan offered them, and 61% held a single target date fund. That one fund decides where every dollar goes, up to the annual 401(k) contribution limits.
Below, we break down how the glide path works, what sits inside a typical fund and what the fees cost over a career. We also cover the enrollment-year portfolios that work the same way inside 529 college savings plans.
A target date fund is a mutual fund, ETF or collective trust that holds a full portfolio in one investment and gets more conservative over time. The year in the name, such as 2055, is the approximate year you expect to retire. Most are a fund of funds, meaning they buy other mutual funds instead of individual stocks and bonds, according to the SEC’s investor bulletin on target date funds. It does the same rebalancing work a robo-advisor does, inside a single fund.
Target date funds held $4.8 trillion at the end of 2025, up 20.3% in one year, according to Morningstar’s 2026 target-date fund report (PDF File). Vanguard alone manages $1.8 trillion of that, a 37% share of the market.
These funds became the default 401(k) investment after the Pension Protection Act of 2006. A Department of Labor rule protects employers who place workers that don’t choose investments into a qualified default investment alternative, or QDIA. That default applies whether your plan enrolls you in pre-tax savings or a Roth 401(k).
More workers will land in one without choosing it. Since 2025, SECURE 2.0 requires most new 401(k) and 403(b) plans to auto-enroll eligible employees, with some exceptions for small and new businesses. Vanguard reports 98% of its plans that name a QDIA pick a target date fund. So if you’re starting to invest after college and never pick a fund, a target date fund is the likely default.
A glide path is the preset schedule a target date fund follows to change its asset allocation over time, cutting stocks and adding bonds. Vanguard’s Target Retirement series starts at 90% stocks at age 25 and falls to 50% at age 65, according to Vanguard’s glide path research (PDF File). It reaches its final mix of 30% stocks around age 72. The fund makes those moves on its own, so you never sell one fund to buy another.
How A Target Date Fund Shifts From Stocks To Bonds (Vanguard Glide Path)
Stock share of Vanguard Target Retirement funds by investor age. Straight lines between published points. Source: Vanguard. The College Investor.
The logic is time. A 30-year-old has decades of paychecks and compound interest ahead to recover from a crash, while a 64-year-old is close to selling. Stocks get the bigger share early because they have out-earned bonds over long periods, as our data on historical returns by asset class shows.
Not every glide path cuts stocks on a straight line from the start. A delayed-onset glide path holds the stock share steady for a set number of years before it starts to shift, as Mark Kantrowitz explains in his best 529 plan investment strategy.
Rebalancing happens inside the fund too. When stocks run up and push the fund past its target mix, the manager sells stock funds and buys bond funds to get back on the glide path. Vanguard lists its rebalancing as daily, as needed, in its target date fund comparison table (PDF File). That’s a chore you’d otherwise track yourself with portfolio analysis tools.
An index-based target date fund holds a handful of other index funds and nothing else. Vanguard Target Retirement 2055 Fund held four funds on June 30, 2026, led by Total Stock Market Index at 54.3%, according to its fund fact sheet (PDF File). You could build a similar mix at any of the best online brokers, but you’d have to rebalance it and change it yourself.
What’s Inside A Target Date Fund (2055 Example)
Vanguard Target Retirement 2055 FundOne fund, four index funds inside
54.3%
Total Stock Market Index
U.S. stocks of every size
36.9%
Total International Stock Index
Developed and emerging market stocks
6.2%
Total Bond Market II Index
Investment-grade U.S. bonds
2.6%
Total International Bond II Index
Foreign bonds, hedged to the dollar
91.2% stocks and 8.8% bonds overall. The stock share falls and the bond share grows each year as 2055 gets closer.
Allocation of underlying funds as of June 30, 2026. Holdings change over time. Source: Vanguard. The College Investor.
Those four funds own U.S. and foreign stocks of every size plus investment-grade bonds. So one 2055 fund gives you slices of thousands of companies, which is more diversification than most people getting started investing build on their own.
Actively managed series work differently. T. Rowe Price Retirement 2055 Fund spreads its money across a long list of T. Rowe Price funds, led by its Growth Stock and Value funds. Fidelity sells both styles: its Freedom Index funds use only index funds, while its Freedom funds mix active and passive funds.
A “to” glide path stops changing at the target date and holds that mix from then on. A “through” glide path keeps cutting stocks for years after the target date. The difference matters most if you’ll leave the money in the fund after you retire instead of moving it with an IRA rollover.
Stock Share By Glide Path: To Vs. Through
T. Rowe Price Retirement (Through)Vanguard Target Retirement (Through)BlackRock LifePath Index (To)
Neutral glide paths, straight lines between published points. Sources: Vanguard, T. Rowe Price, BlackRock. The College Investor.
BlackRock’s LifePath Index series, which also comes as an iShares ETF you can buy at an online broker, is a “to” fund. It reaches 40% stocks at the target date, then holds that mix through retirement. T. Rowe Price Retirement holds the most stock at the target date, 55%, according to T. Rowe Price’s glide path research (PDF File). It doesn’t reach its final 30% stock share until 30 years later.
Target Date Glide Paths Compared
| Fund Series | Glide Path | Stocks At Start | Stocks At Target Date | Final Stock Share | Reaches Final Mix |
|---|---|---|---|---|---|
| Vanguard Target Retirement | Through | 90% | 50% | 30% | About 7 years after the target date |
| T. Rowe Price Retirement | Through | 98% | 55% | 30% | 30 years after the target date |
| BlackRock LifePath Index | To | 99% | 40% | 40% | At the target date |
Neutral stock allocations. Sources: Vanguard, T. Rowe Price, BlackRock. The College Investor.
Neither approach is wrong, but they fit different plans. A “through” fund suits someone who will draw income from the fund for decades. A “to” fund suits someone who plans to move the money into an annuity or their own mix at retirement. Test both paths against your spending with one of these retirement calculators.
Enter the year you plan to retire and pick a fund family to see where that fund sits on its glide path today. The checker also shows how the other two families’ funds with the same year compare. For dollar projections, pair it with our investment calculator.
Target date mutual funds charged an asset-weighted average of 0.27% in 2025, down from 0.29% in 2024, per Morningstar. Index series cost far less, and Morningstar found active target date funds cost about three times as much as the average passive fund in the same categories. Every fund charges an expense ratio, and the SEC notes some target date funds layer their own fee on top of the underlying funds’ fees.
Vanguard Target Retirement funds charge 0.08%. T. Rowe Price Retirement 2055 Fund’s Investor Class charges 0.63%. Over a career, that spread works like compound interest in reverse.
What Fees Cost On $500 A Month
After 30 years, the 0.63% fund ends $55,680 behind the 0.08% fund on the same $180,000 of contributions.
Assumes $500 invested monthly and a 7% annual return before fees. Hypothetical illustration, not a guarantee. Source: The College Investor calculations.
The chart assumes $500 a month for 30 years and a 7% annual return before fees. That’s a $55,680 difference between the cheapest and priciest fund on the same $180,000 of contributions. Run your own numbers with our investment calculator.
Your 401(k) plan picks the fund series and share class, so you can’t always choose the cheapest one. Check the expense ratio in your plan’s fee disclosure, and compare it with the plan’s index funds. In an IRA, you pick the provider, which is one reason to compare the best IRA accounts before you open one.
Add 65 to your birth year and round to the nearest year ending in 0 or 5. Someone born in 1992 gets 2057, which rounds to a 2055 fund. The funds assume retirement at or around 65, as Fidelity’s prospectus states. For readers starting to invest after college, that points to a 2065 or 2070 fund.
You can pick a different year on purpose. A later year, such as 2060 instead of 2055, keeps more of your money in stocks for longer, and an earlier year does the opposite. That’s a cleaner way to adjust risk than building your own asset allocation around the fund.
Hold one target date fund and nothing else in that account. Adding a stock index fund or a second target date fund throws off the glide path you’re paying for. If you want to set your own stock share, a robo-advisor lets you do that.
Count your other accounts too. A spouse’s 401(k), a Roth IRA at another broker or a pension changes how much risk your household carries. Your target date fund can’t see any of it, which is why the SEC bulletin tells investors to weigh their other assets.
Target date funds can lose money, including right at the target date. In 2008, funds with a 2010 target date lost almost 25% on average, SEC Chairman Mary Schapiro said at a 2009 joint SEC and Labor Department hearing. Results ranged from a 3.6% loss to a 41% loss. Money you need within a year or two belongs in short-term investments, not a target date fund.
Funds with the same year carry different risk. At the target date, the three series in our chart range from 40% to 55% stocks. Check the glide path in the prospectus, or on the fund’s page at your online broker, before you buy.
The fund also treats everyone the same age the same way. It doesn’t know your savings, your income or whether you plan to retire at 58 or 70. Our data on average net worth of millennials shows how wide that range runs, and two 35-year-olds at opposite ends still get the same mix.
A target date fund is best for investors who want one decision and no upkeep, especially in a 401(k) with a short fund menu. It’s also a strong pick for a first Roth IRA, where the balance is too small to split across several funds.
It’s a weaker fit in a taxable brokerage account. The bond funds inside pay interest taxed as ordinary income, and you can’t move those bonds into a tax-sheltered account the way a do-it-yourself investor can. Rebalancing inside the fund can also trigger taxable distributions at capital gains tax rates.
Skip it, or use it only as your core holding, if you want close control over your stock share. The same goes if your plan’s version costs more than its index funds, which you can check against our breakdown of expense ratios.
529 plans use the same idea under names like enrollment-year or target enrollment date portfolios. California’s ScholarShare 529, Georgia’s Path2College 529 and Utah’s my529 all offer them. You pick the year your child starts college, and the portfolio moves toward bonds and cash as that year nears. Compare how these portfolios have performed in our ranking of the best 529 plans.
The glide path is shorter and ends far more conservative than a retirement fund. John Hancock’s Freedom 529 enrollment portfolios level out at 80% bonds and 20% stocks as enrollment nears. That’s because a 529 has to cover a tuition bill on a fixed date. Our numbers on how much you should have in a 529 plan by age show what that target looks like.
Plans are moving from age-based portfolios to enrollment-year portfolios. Iowa’s ISave 529 replaced its age-based tracks with enrollment-based portfolios and moved existing accounts over automatically. You can also join another state’s 529 plan, either directly or through one of the best brokers to open a 529 plan.
Age-Based Vs. Enrollment-Year 529 Portfolios
| Feature | Age-Based Portfolios | Enrollment-Year Portfolios |
|---|---|---|
| How It Works | Your balance moves to a new, more conservative portfolio as your child reaches set ages | One portfolio named for the college start year adjusts its own mix over time |
| Size Of Each Shift | Larger steps, such as a 15% stock cut at age 9 in Voya’s model | Smaller steps, such as a 5% cut at the same age in Voya’s model |
| What You Choose | Your child’s age band | The year your child starts college |
Source: Voya, plan disclosures. The College Investor.
Voya’s modeling for Wisconsin’s Tomorrow’s Scholar plan found the two approaches end with similar balances on average. But the age-based path cut its stock allocation by 15% in one step at age 9, versus 5% for the enrollment-based path. Smaller steps lower the odds that one big move lands in a bad market. See which portfolios your state offers in our 529 plan rules by state.
A Different Glide Path Design
Not every 529 glide path starts cutting stocks right away. Mark Kantrowitz, one of our contributing writers, holds a patent on a delayed-onset glide path (PDF File), which keeps the stock share fixed for a set number of years before it begins to shift. He walks through how families can use it in his delayed-onset 529 investment strategy.
Yes. Target date funds hold stocks at every point on the glide path, and 2010 funds lost almost 25% on average in 2008. Keep money you need soon in short-term investments instead.
The fund keeps running. A “to” fund holds its mix, while a “through” fund keeps adding bonds. Vanguard funds look like its Target Retirement Income Fund within seven years of the target date, and Fidelity says its Freedom Index funds match its retirement fund’s mix about 10 to 19 years after the target year.
No. Two target date funds give you an average of two glide paths, which neither company designed. Pick one year, or use a robo-advisor if you want a custom mix.
Yes, especially in a 401(k) or a first IRA. A 2065 or 2070 fund holds 90% to 99% stocks, which fits a 40-year time horizon. Our investing 101 course covers the next steps once you outgrow a single fund.
Not when they sit in a 401(k) or IRA, since the FAFSA doesn’t count qualified retirement accounts. A target date fund in a taxable brokerage account or a parent-owned 529 does count as an asset, as we explain in our post on reporting a 401(k) or IRA on the FAFSA.
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