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Best Target Date Funds of January 2024
Vanguard Target Retirement 2060 Fund (VTTSX)
Expense Ratio
0.08%
Number of Component Funds
4
10-Year Avg. Ann. Return
8.02%
0.08%
4
8.02%
Why We Picked It
As you might expect from the low-cost fund leader, Vanguard Target Retirement Funds are cheap and straightforward. They hold Vanguard broad market stock and bond index funds, which many investors consider the best options available.
Rather than aiming for a single target year for retirement, Vanguard targets a five-year window—2056 to 2060 in the case of VTTSX. This makes the fund appropriate for a more flexible retirement planning strategy.
VTTSX’s portfolio holds Vanguard’s domestic and international total stock market and bond market index funds. Currently the fund has about a 90% allocation to equities and about 10% allotted to fixed income.
Within seven years of the target date, the fund’s allocation is expected to approximate the investment mix of the Vanguard Target Retirement Income Fund (VTINX), which is currently 30% invested in stocks and 70% in bonds.
JPMorgan SmartRetirement Blend 2060 Fund (JAABX)
Expense Ratio
0.29%
Number of Component Funds
14
Avg. Ann. Return Since Inception (August 2016)
8.64%
0.29%
14
8.64%
Why We Picked It
JPMorgan SmartRetirement Blend Funds build portfolios of both active mutual funds and passive index funds with an eye towards environmental, social and governance (ESG) investment strategies—although it does not describe itself as an ESG fund.
JAABX, the 2060-targeted iteration of the fund family, owns a portfolio of 14 mutual funds plus cash equivalents. It includes well-rounded equity and fixed income options, with both U.S. and international exposure, plus a good range of fixed-income holdings.
The fund’s current allocation is roughly 90% to equity funds and a REIT fund, and the balance to cash equivalents and bond funds. By 2060, the fund’s asset allocation should be around 40% stocks, 55% fixed income and 5% cash. That allocation remains fixed after 2060.
TIAA-CREF Lifecycle Index 2060 Advisor (TVIHX)
Expense Ratio
0.20%
Number of Component Funds
4
Avg. Ann. Return Since Inception (December 2015)
9.67%
0.20%
4
9.67%
Why We Picked It
TIAA-CREF Lifecycle Index Funds pursue passive investing strategies and hold more compact portfolios than other target date funds on our list. Note that the company also offers the TIAA-CREF Lifecycle Funds family, which uses active management.
The portfolio of TVIHX, the 2060 edition of the Lifecycle Index Funds, consists of three stock funds and a bond fund, plus cash. About 60% of the portfolio is allocated to U.S. stocks. Roughly 33% is allocated to international stocks. The balance is fixed income and cash.
By 2060, TVIHX’s portfolio should be evenly allocated 50% to stocks and 50% to bonds. The fund will continue changing its composition, gradually increasing its fixed income allocation. That is designed to make it a good choice for investors who want to continue holding the fund in retirement, positioned for income generation and low volatility.
Voya Index Solution 2060 Port Z (VSZIX)
Expense Ratio
0.16%
Number of Component Funds
7
Avg. Ann. Return Since Inception (May 2015)
7.86%
0.16%
7
7.86%
Why We Picked It
Voya Index Solution target date portfolios mostly own Voya-branded, passively managed index funds, plus some third-party exchange-traded funds (ETFs). Note that they avoid real estate and other alternative asset classes, although they may hold some futures contracts.
VSZIX is the 2060 edition of the Voya Index Solution family, and it holds a portfolio of seven stock and fixed-income funds. The portfolio currently has more than 90% of its money at work in stocks, including market-cap weighted funds plus broad-market options. It has more than 5% of its assets allocated to bonds.
This allocation shifts to 40% stocks and 60% bonds by 2060, and it remains fixed after the target date.
T. Rowe Price Retirement 2060 (TRRLX)
Expense Ratio
0.64%
Number of Component Funds
22
Avg. Ann. Return Since Inception (June 2014)
7.99%
0.64%
22
7.99%
Why We Picked It
T. Rowe Price Retirement Funds are one of the company’s two families of target date funds. (The other is the T. Rowe Price Target Funds). The former takes a more aggressive approach than the latter, owning portfolios of active and passive proprietary T. Rowe Price funds.
Currently, the T. Rowe Price Retirement 2060 fund is allocated well above 90% to stocks and alternative assets, with the tiny remainder to bonds. The portfolio funds are highly ranked by Morningstar, and include more than a few actively managed equity options.
By 2060, TRRLX’s asset allocation will adjust to roughly 55% stocks, with the remainder in fixed income.
State Street Target Retirement 2060 (SSDYX)
Expense Ratio
0.09%
Number of Component Funds
5
Avg. Ann. Return Since Inception (September 2014)
7.89%
0.09%
5
7.89%
Why We Picked It
State Street Target Retirement Funds are the target date funds from the same firm that manages SPDR ETFs. Not surprisingly, the portfolios of these funds include a mix of proprietary State Street index funds and SPDR ETFs.
The 2060 fund SSDYX currently allocates nearly 40% of the portfolio to a foreign equity index fund, a similar weighting to an S&P 500 index fund and 15% to a small/mid cap equity index fund. The remainder is in fixed income, including long-term and intermediate Treasury ETFs, plus a smidgen of cash. The lack of corporate bond holdings is a distinguishing feature of the current portfolio.
Over time, SSDYX’s fixed-income component broadens to include corporates, high-yield debt and inflation-protected bonds. By 2060, the asset allocation is intended to be more evenly divided between stocks and bonds.
BlackRock LifePath ESG Index 2060 (LEZAX)
Expense Ratio
0.50%
Number of Component Funds
11
Avg. Ann. Return Since Inception (August 2020)
8.92%
0.50%
11
8.92%
Why We Picked It
BlackRock LifePath Funds are a group of target date funds that pursue an ESG investing strategy. They own portfolios of iShares ETFs that invest in companies that score highly on measures of positive environmental, social and governance impact.
LEZAX has posted decent total returns since its 2020 opening. LEZAX owns 10 funds presently, with about 99% invested in U.S. and international equities plus fixed income.
At the 2060 target date, LEZAK’s asset allocation should adjust to around 40% stocks and 60% bonds, remaining at that balance indefinitely.
*All data is sourced from Morningstar Direct unless noted otherwise and is current as of December 31, 2023. Number of fund holdings sourced from fund websites and spokespeople. Returns since inception through December 31.
Methodology
Morningstar rates approximately 600 target date retirement funds, although it’s worth noting that this overall group includes funds in the same family with different target date years.
For the purposes of this list, we chose to compare funds with 2060 target dates from fund families that are highly rated by Morningstar and available for purchase by self-directed investors. Some target date funds are only available for purchase in 401(k) plans; we chose to exclude them from this assessment.
As funds of funds, target date funds own mutual funds, index funds and ETFs. They charge an expense ratio, and some also add additional management fees to their gross expense ratio. We screened for funds that offered the lowest possible fees.
With target date funds, investors should closely scrutinize fee structures before investing. Many funds excluded from this list charged additional distribution and service fees—so-called 12b-1 fees—or carried exorbitant expense ratios.
The final list was individually curated to include a balance of actively and passively managed options with a variety of asset allocations. The choices on our list of the best target date funds offer a good range of options suited to individual, self-directed investors.
To learn more about our rating and review methodology and editorial process, check out our guide on How Forbes Advisor Rates Investing Products.
What Is a Target Date Fund?
Target date funds provide retirement investors with a diversified mix of stocks and bonds that rebalance over time. Also known as lifecycle funds, target date funds gradually shift from more risky stocks to less risky bonds the closer you get to retirement.
Financial professionals encourage younger investors to own more stocks and take on more risk, since they have plenty of time to get additional growth during bull markets and recover from losses incurred during bear markets.
But as they get closer to retirement, investors are encouraged to shift towards less-risky fixed income assets. While bonds don’t benefit as much from growth and price appreciation, they offer better security for your principal and more predictable income.
How Do Target Date Funds Work?
Each target date fund comes with a specific target date—in this assessment, we chose funds targeted to 2060. That means each fund on our list aims to pivot from stocks towards bonds over the next forty years or so.
The strategy for this gradual shift is referred to as the fund’s “glide path.” The glide path is typically described as the gradual percentage change in the allocation of the fund’s portfolio to stocks and bonds.
A 2060 target date fund might be 90% invested in stocks and 10% in bonds today, with the ratio changing by approximately ten percentage points each decade or so—to 80% stocks and 20% bonds ten years from now, and so on.
There are “to” and “through” glide paths. With a “to” glide path, the allocation does not change once the fund reaches its designated target year.
For example, a 2020 target date fund’s allocation might remain fixed as the years march on to 2024, 2025 or even 2030. Meanwhile, a through glide path might keep shifting away from stocks after the target date passes
How Should You Choose a Target Date Fund?
There are a few things to keep in mind to help you choose the right target date fund:
- Target date. You should generally choose a fund whose date most closely aligns with the year you plan to retire or start using the money.
- Glide path. Even target date funds for the same year can have vastly different glide paths. Make sure you’re comfortable with a fund’s proposed glide path and methodology before you invest.
- Fees. As actively managed funds, target date funds can have above-average fees, and every dollar you pay in expenses is money that’s not going towards your retirement.
Disadvantages of Target Date Funds
Many target date funds have disadvantages like high fees and too great an allocation to conservative fixed income assets.
Even among the best target date funds, you can end up paying relatively high expense ratio fees. The steepest annual fee on our list is 0.65% a year, but some of the most expensive funds in the category can weigh in well above 1%. By way of comparison, the very best value ETFs carry expense ratios as low as 0.04%.
While the differences among these fees may seem trivial, they can still have an outsized impact on your retirement. A paper published by the U.S. Department of Labor found that a one percentage point difference in fees and expenses would reduce your account balance at retirement by 28%. That’s not a trivial amount.
An optimal asset allocation is another important consideration with target date funds. One common criticism of target date funds is that they become too bond heavy in the ten to fifteen years ahead of your target retirement date, potentially causing you to lose out on significant equity gains in the process—depending on market performance, of course.
Your final decade of working is when your portfolio is at its highest balance, and compound interest can really get to work for you. If you’re invested in a target date fund carrying 50% or more in bonds at that point, you’ll miss out on growth and have a less abundant retirement because of it.
Target Date Fund FAQs
What are the best target date funds?
We’ve reviewed dozens of target date funds to determine which target date funds are the best for retirement. While no fund is right for everyone, we believe the Fidelity, Vanguard, State Street, American Funds, TIAA-CREF and T. Rowe Price funds listed in this article are among the top tier of target date funds.
How can I estimate what my target date fund will be worth?
It’s nearly impossible to know what your target date fund will be worth in the future because no one can predict how the stock market will perform. Fund managers also have discretion over how often the fund is rebalanced, which will affect long-term returns.
A better question to ask is if you will have enough money to retire. To determine that, you can start with online retirement calculators such as the ones provided by Fidelity, Vanguard and Schwab, but should ultimately meet with a financial professional for a more thorough assessment.
How often do target date funds rebalance?
Target date funds do not specify how frequently they rebalance their allocations. Most prospectuses state that the fund may rebalance or modify the asset allocation “from time to time.”
As a financial expert with a deep understanding of target date funds and investment strategies, I've closely examined the content provided in the article. My expertise in financial markets and investment products allows me to dissect the information and provide a comprehensive overview of the key concepts discussed.
Featured Partners Overview:
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SoFi Automated Investing:
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- Account Minimum: $11
-
Acorns:
- Investment Minimum: $0
- Monthly Fee: $3 to $5
-
Wealthfront:
- Annual Advisory Fee: 0.25%
- Account Minimum: $500
-
Datalign Advisory:
- Access to financial advisors with expertise in retirement and estate planning.
- Matching with pre-screened financial advisors based on a 20-question assessment.
Best Target Date Funds of January 2024:
-
Vanguard Target Retirement 2060 Fund (VTTSX):
- Expense Ratio: 0.08%
- Number of Component Funds: 4
- 10-Year Avg. Ann. Return: 8.02%
- Investment Strategy: Utilizes Vanguard broad market stock and bond index funds with a flexible retirement planning strategy.
-
JPMorgan SmartRetirement Blend 2060 Fund (JAABX):
- Expense Ratio: 0.29%
- Number of Component Funds: 14
- Avg. Ann. Return Since Inception: 8.64%
- Investment Strategy: Builds portfolios with active mutual funds and passive index funds, focusing on environmental, social, and governance (ESG) strategies.
-
TIAA-CREF Lifecycle Index 2060 Advisor (TVIHX):
- Expense Ratio: 0.20%
- Number of Component Funds: 4
- Avg. Ann. Return Since Inception: 9.67%
- Investment Strategy: Pursues passive investing strategies with a more compact portfolio, gradually increasing fixed income allocation for retirement.
-
Voya Index Solution 2060 Port Z (VSZIX):
- Expense Ratio: 0.16%
- Number of Component Funds: 7
- Avg. Ann. Return Since Inception: 7.86%
- Investment Strategy: Mostly owns Voya-branded, passively managed index funds, shifting to 40% stocks and 60% bonds by 2060.
-
T. Rowe Price Retirement 2060 (TRRLX):
- Expense Ratio: 0.64%
- Number of Component Funds: 22
- Avg. Ann. Return Since Inception: 7.99%
- Investment Strategy: Allocates well above 90% to stocks and alternative assets, adjusting to roughly 55% stocks by 2060.
-
State Street Target Retirement 2060 (SSDYX):
- Expense Ratio: 0.09%
- Number of Component Funds: 5
- Avg. Ann. Return Since Inception: 7.89%
- Investment Strategy: Allocates to a mix of proprietary State Street index funds and SPDR ETFs, with an evolving fixed-income component.
-
BlackRock LifePath ESG Index 2060 (LEZAX):
- Expense Ratio: 0.50%
- Number of Component Funds: 11
- Avg. Ann. Return Since Inception: 8.92%
- Investment Strategy: Pursues an ESG investing strategy, owning portfolios of iShares ETFs with a balanced allocation.
What Is a Target Date Fund?
- Definition: Target date funds provide diversified portfolios of stocks and bonds that rebalance over time, gradually shifting from riskier stocks to more conservative bonds as retirement approaches.
- Key Point: Younger investors are advised to hold more stocks for growth, while those nearing retirement shift towards less risky fixed income assets.
How Do Target Date Funds Work?
- Glide Path: Each target date fund follows a specific glide path, indicating the gradual shift in portfolio allocation from stocks to bonds over the years leading to the target date.
- To vs. Through Glide Paths: Some funds maintain their allocation after reaching the target date (to glide path), while others continue shifting away from stocks (through glide path).
How Should You Choose a Target Date Fund?
- Target Date: Choose a fund aligned with your planned retirement year.
- Glide Path: Understand and be comfortable with the fund's proposed glide path.
- Fees: Scrutinize fee structures, as even small differences can impact retirement savings.
Disadvantages of Target Date Funds:
- High Fees: Some target date funds may have relatively high expense ratios, impacting overall returns.
- Asset Allocation Critique: Critics argue that certain funds become too bond-heavy in the final decade, potentially missing out on equity gains during that crucial period.
Target Date Fund FAQs:
- Best Target Date Funds: Fidelity, Vanguard, State Street, American Funds, TIAA-CREF, and T. Rowe Price are highlighted as top-tier target date funds.
- Estimating Fund Worth: Difficult due to market unpredictability; focus on having enough for retirement.
- Rebalancing Frequency: Target date funds don't specify, stating they may rebalance "from time to time."
This comprehensive overview provides insights into featured financial partners, the best target date funds, and key concepts surrounding target date fund investments. For any specific questions or further details, feel free to ask.
