Best target-date funds in July 2024
“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
BLUEPRINT
Updated 11:42 p.m. UTC July 2, 2024
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Target-date funds aim to simplify the journey toward retirement by balancing risk and reward based on your desired retirement date. A key feature is an automated portfolio strategy that evolves as you age.
“Target-date funds promise to free up individuals from making asset allocation changes down the road, as they’re sold as a sort of autopilot for retirement,” said Robert R. Johnson, professor of finance at Creighton University’s Heider College of Business.
To help investors find the best target-date funds of 2024, we screened the available universe based on fees, assets under management, management style and minimum required investment.
Best target-date funds
- Vanguard Target Retirement 2050 Fund (VFIFX).
- Vanguard Target Retirement 2055 Fund (VFFVX).
- Schwab Target 2050 Index Fund (SWYMX).
- Schwab Target 2055 Index Fund (SWYJX).
- Fidelity Freedom Index 2050 Fund Investor Class (FIPFX).
- Fidelity Freedom Index 2055 Fund Investor Class (FDEWX).
Vanguard Target Retirement 2050 Fund (VFIFX)
Vanguard Target Retirement 2055 Fund (VFFVX)
Schwab Target 2050 Index Fund (SWYMX)
Schwab Target 2055 Index Fund (SWYJX)
Fidelity Freedom Index 2050 Fund Investor Class (FIPFX)
Fidelity Freedom Index 2055 Fund Investor Class (FDEWX)
Compare the best target-date funds
| FUND (TICKER) | EXPENSE RATIO | TOTAL ASSETS | MINIMUM INVESTMENT |
|---|---|---|---|
Vanguard Target Retirement 2050 Fund (VFIFX)
| 0.08%
| $70.4 billion
| $1,000
|
Vanguard Target Retirement 2055 Fund (VFFVX)
| 0.08%
| $46.9 billion
| $1,000
|
Schwab Target 2050 Index Fund (SWYMX)
| 0.08%
| $862 million
| $0
|
Schwab Target 2055 Index Fund (SWYJX)
| 0.08%
| $567.3 million
| $0
|
Fidelity Freedom Index 2050 Fund Investor Class (FIPFX)
| 0.12%
| $18.1 billion
| $0
|
Fidelity Freedom Index 2055 Fund Investor Class (FDEWX)
| 0.12%
| $13.1 billion
| $0
|
Methodology
Our curated rankings of the top target-date funds were created by applying a screen of several “must-have” metrics:
- Total assets: All target-date funds on this list have accrued total assets of at least $300 million for their particular share class.
- Share class: All target-date funds on this list represent share classes open to retail investors, not institutional investors.
- Target retirement date: To qualify for this ranking, a target-date fund must have a target retirement date of 2050 to 2055.
- Expense ratios: All funds selected for this ranking have a net expense ratio under 0.15% to ensure affordability.
- Minimum investment: In the interest of accessibility, all target-date funds on this ranking cannot require a minimum investment higher than $1,000.
An experienced fund analyst selected the funds above, but they may not be right for your portfolio. Before purchasing any of these funds, do plenty of research to ensure they align with your financial goals and risk tolerance.
Why other funds didn’t make the cut
We began by setting parameters for an appropriate target retirement date range that best suited a wide swathe of U.S. investors. According to U.S. Census Bureau data released in June, America’s median age now sits at 38.9 years, which we rounded up to 39.
Based on the Social Security full retirement age of 67 for people born in 1960 or later, a 39-year-old would have a time horizon of 28 years to retire. Calculating from 2023 would result in a target retirement date of 2051.
Therefore, we set a half-decade bracket when screening for possible target-date funds, only assessing those that specified a target retirement date of 2050 to 2055. Target-date funds with target retirement dates that fell above or below this parameter were excluded.
We then screened out actively managed target-date funds based on the latest results of the SPIVA Scorecard from S&P Dow Jones Indices, which showed the majority of actively managed funds chronically underperform their index benchmarks over long periods.
Finally, we set strict caps on fund net expense ratios and minimum investment requirements to ensure our picks were as affordable and accessible to a wide range of investors. We also set a minimum limit for assets under management for all share classes to ensure that our picks were sufficiently popular and capitalized.
Final verdict
Target-date funds can be an excellent way of creating a highly diversified, professionally managed and automated investment portfolio at a low cost. These funds are simple to understand and take much of the guesswork and knowledge barriers out of investing, which can help new investors get started easily.
Our pick for the best target-date fund goes to VFIFX. Despite requiring a $1,000 minimum investment, this fund has a low expense ratio of 0.08%, or just $8 annually in fees for a $10,000 investment. It also has a long track record of operation since 2006, has attracted a high amount of assets and is backed by Vanguard, a highly reputable asset management firm.
What is a target-date fund?
A target-date fund is an automated investment vehicle that provides investors with a portfolio of stocks, bonds and possibly other assets. These funds are designed to evolve continuously as investors age, adapting to their changing time horizons, risk tolerance and investment objectives.
These funds are called “target date” because they are designed with a specific retirement date. For example, a 2070 target date fund is intended for investors looking to retire at or around that year. This mechanic simplifies investment selection and portfolio management, allowing investors to stay hands-off.
Using the example of the hypothetical 2070 target date fund, in 2024, the fund may have a higher proportion of stocks and a lower proportion of bonds. This fund starts with more investment risks for a chance at higher returns as retirement is still a long way off, so capital accumulation is the main focus.
By 2070, as retirement draws near, the same fund may shift to a higher allocation of bonds and a lower allocation of stocks. This is meant to decrease risk as retirement nears, as older investors favor capital preservation. Once the investor is in retirement, the fund may shift further to increase income potential.
How to choose a target-date fund
Choosing a target-date fund is like picking out a new car. Using that analogy, factors may include:
- The fund’s target date: This should be the main consideration. If you’re looking to retire around 2030, a target-date fund set for 2060 may not be appropriate. That would be like buying a sports car when you need a minivan. Always try to match the target-date fund’s retirement year to your planned retirement date as closely as possible.
- The fund’s strategy: Just as cars have different features (some are more fuel-efficient, while others are built for speed), funds have different investment strategies. Some might track an index, while others are actively managed. Make sure the fund’s strategy aligns with your risk tolerance and objectives.
- Fees and costs: Just as cars have different costs (purchase price, gas, insurance), funds have different fees. Lower costs will let you keep more of your investment gains. Pay attention to fund expense ratios, possible 12b-1 fees and sales loads.
Frequently asked questions (FAQs)
As with any investment, whether target-date funds are a good investment depends on your circumstances, including your retirement goals, risk tolerance and investment knowledge. In general, they can be an excellent option for those who prefer a passive, hands-off and simple approach to investing.
However, target-date funds may not be the best fit for everyone, especially for high-net-worth investors or those with a complex financial situation who may benefit from the services of a financial advisor and customized portfolio strategy.
“The downside of target-date funds is that they take one variable — a person’s expected retirement date — to guide the construction of the portfolio and the holdings of that portfolio through time,” Johnson said. “A person’s holdings outside of the target-date fund, such as real estate (and) insurance policies, should also be factored in when designing an investment portfolio.”
Target-date funds work by automatically adjusting their asset allocation — the proportion of stocks versus bonds — over time based on a glide path and a set retirement date, known as the target date.
These funds generally start with a higher allocation to riskier investments, such as stocks, when the retirement date is further away. Over time, as the target date approaches, the fund gradually allocates toward more conservative investments, such as bonds and cash, to preserve wealth.
Therefore, target-date funds can be considered an automated investment vehicle focusing on early growth and gradually shifting toward capital preservation and income as retirement nears.
The ideal time to invest in a target-date fund depends on your circumstances and retirement goals.
However, these funds are generally designed for long-term investment. They are most beneficial when you have a specific retirement date and a long time horizon, allowing the fund to move through its glide path.
As with all investments, investing as early as possible can provide a longer time horizon for returns to compound.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
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