Target-date funds: 7 Ways to Maximize Retirement Savings

Saving for retirement can feel overwhelming, especially when you’re staring at a long list of investment options you barely recognize. Target-date funds exist precisely to cut through that noise — offering a single, all-in-one portfolio that automatically adjusts as you get closer to retirement.

These funds have grown into one of the most widely used retirement vehicles in the country, holding trillions of dollars in assets across 401(k) and IRA accounts. Yet most people pick one, move on, and never think about it again.

Fortunately, there are smarter ways to approach them. From understanding glide paths to comparing fees and avoiding common missteps, the strategies below can help you get significantly more out of your retirement savings over time.

What Target-Date Funds Actually Are

A target-date fund is a diversified, all-in-one investment designed around a specific retirement year — say, 2045 or 2055. The fund holds a mix of stocks, bonds, and other assets, then gradually shifts toward a more conservative allocation as that year approaches.

This shift is called a glide path. In simple terms, think of it like an airplane descending slowly toward the runway — the further you are from retirement, the more risk the fund takes on; as you get closer, it pulls back.

According to Investor.gov, these funds are available in most 401(k), 403(b), and IRA accounts, making them one of the most accessible retirement tools for everyday American workers.

7 Ways to Maximize Your Target-Date Fund Strategy

Target-date funds are often pitched as the ultimate “set it and forget it” retirement solution. While their built-in diversification and automatic rebalancing make investing incredibly simple, just picking a year and walking away might mean leaving money on the table.

To truly get the most out of these all-in-one portfolios, you need to look under the hood and ensure they align with your specific financial goals. Here are seven actionable strategies to help you optimize your target-date fund and secure a more comfortable retirement.

1. Pick the Right Target Year — Not Just the One That Sounds Right

Most people choose a target-date fund based on their expected retirement year, which is a perfectly reasonable starting point. However, your risk tolerance should also factor into that decision.

If you’re comfortable with more volatility and want higher growth potential, you might choose a fund dated five to ten years later than your planned retirement. Conversely, if you prefer stability, an earlier-dated fund may suit you better.

2. Understand the “To” vs. “Through” Distinction

Not all glide paths are built the same way. Some funds reach their most conservative allocation right at the target retirement date — these are called “to” funds. Others continue adjusting well beyond that year — those are called “through” funds.

According to Vanguard’s research on glide path design, “through” funds tend to maintain higher equity exposure into retirement, which may help address longevity risk — the very real possibility of outliving your savings.

Ultimately, choosing between “to” and “through” depends largely on whether you plan to withdraw aggressively early in retirement or let the fund continue growing for decades.

3. Scrutinize the Fees Before You Commit

Fees are one of the most overlooked factors in retirement planning, and they matter enormously over time. A 0.1% difference in expense ratio can translate to thousands of dollars lost — or saved — over a 30-year horizon.

The U.S. Department of Labor specifically flags that fees in target-date funds vary widely across providers, and that employees should compare options rather than defaulting without thought.

Here’s a quick look at how fees and glide path styles differ across some of the top-rated fund families, according to Morningstar’s evaluation:

As you can see, even among top-rated options, fee differences are significant. Prioritize low-cost index-based target-date funds whenever they’re available in your plan.

4. Don’t Double Up on Investments

One surprisingly common mistake is holding a target-date fund alongside individual stocks, bond funds, or other mutual funds in the same retirement account. Since these funds are already diversified, adding overlapping assets can unintentionally skew your allocation.

For instance, if your target-date fund already holds 80% equities and you also hold a large-cap stock fund on the side, you may end up far more exposed to market swings than you realize. Basically, keep it simple — that’s the whole point of these funds.

5. Use the Behavioral Advantage They Offer

Research from MIT Sloan found that investors who use target-date funds tend to trade less frequently and maintain more diversified portfolios over time. That’s not a small thing — frequent trading is one of the biggest destroyers of long-term investment returns.

In essence, the automatic rebalancing built into these funds removes emotional decision-making from the equation. When markets drop, there’s no temptation to bail out or manually shift allocations — the fund handles it.

6. Revisit Your Choice After Major Life Changes

Target-date funds aren’t completely “set it and forget it” if your life circumstances shift meaningfully. Marriage, divorce, a significant salary change, or an earlier-than-planned retirement can all affect whether your current fund still fits.

To that end, periodically reviewing your fund — even just once a year — helps ensure your retirement timeline and risk tolerance still align with the fund you chose years ago. A lot can change in a decade.

7. Read the Prospectus (Yes, Really)

The fund prospectus lays out exactly how the glide path works, what assets the fund holds, and what fees you’ll pay. Most investors skip it entirely, but reading the prospectus can reveal important differences between funds with similar names.

Two funds both labeled “2045” can have very different equity-to-bond ratios, underlying fund quality, and fee structures. The SEC’s Investor Bulletin on target-date funds encourages exactly this kind of informed comparison before committing.

Common Misconceptions About Retirement Date Funds

They’re Not Guaranteed

A fund labeled “2045” does not mean your money is safe by 2045. These are market-based investments that can and do lose value, particularly during economic downturns near the target date.

Investors who retire during a market downturn — something known as sequence-of-returns risk — can be significantly impacted, especially in “to” funds that reduce equity exposure sharply right at retirement.

One Fund per Account Is Usually Enough

Target-date funds are designed to function as a complete portfolio on their own. Stacking multiple target-date funds or combining them with other diversified funds rarely adds value and often adds confusion.

If you have multiple retirement accounts — say, a 401(k) and a Roth IRA — it may still make sense to hold the same or similar target-date fund in each, depending on your overall strategy and tax situation.

Who Benefits Most from These Funds

Retirement date funds are particularly well-suited for a few specific types of investors. Rather than a one-size-fits-all solution, they shine brightest when matched to the right situation:

• Workers who are new to investing and want a diversified starting point without extensive research
• People enrolled in a 401(k) through automatic enrollment, where a target-date fund is often the default option
• Investors who want hands-off management but still want their portfolio to evolve over time
• Those who lack access to a financial advisor and need a reasonable default strategy
• Workers who tend to make emotional investment decisions during market volatility

Even experienced investors sometimes prefer these funds for a portion of their portfolio, valuing the built-in discipline they provide against reactive decision-making.

Making Your Retirement Strategy Work Harder

Target-date funds have transformed retirement investing for millions of Americans by making diversification and automatic rebalancing genuinely accessible. Still, getting the most out of them requires more than a single click at open enrollment.

Choosing the right target year, understanding your fund’s glide path, keeping fees low, and avoiding the trap of over-layering investments are all moves that compound in your favor over decades. The behavioral benefits — less trading, more consistency — are just as valuable as the financial mechanics.

Before your next enrollment period, compare your current fund against alternatives in your plan. Check the expense ratio, read the glide path description, and confirm the fund still matches where you are in life. Small adjustments made early can have an outsized effect on what’s waiting for you at retirement.

If you’re a visual learner, understanding how a glide path shifts your money—and seeing the real impact of those fees we talked about—is much easier with a video:

Frequently Asked Questions