Target-Date Funds: How They Work, What They Cost and How to Choose One
A target-date fund is a single fund that holds a mix of stock and bond funds and shifts that mix toward bonds as a named year, usually your planned retirement year, gets closer. You pick the year, and the fund manager does the rebalancing. The catch is that funds with the same year can hold different amounts of stock and charge very different fees: among the 2050 funds we checked, annual costs run from 0.08% (Vanguard) to 0.68% (Fidelity Freedom 2050, retail class).
Table of Contents
The Short Answer
- What it is: a fund of funds labelled with a year (2040, 2050, 2060). It starts mostly in stocks and moves toward bonds and cash on a fixed schedule called the glide path.
- What to check: the expense ratio, how much stock the fund holds now, how much it will hold at the target year, and whether it keeps de-risking after that year.
- Fees differ a lot: Vanguard Target Retirement 2050 costs 0.08% a year, Schwab Target 2050 Index 0.08% after a fee reduction, Fidelity Freedom 2050 0.68% (retail class), or 0.37% for its Premier class, which has a $1 billion minimum initial investment, and T. Rowe Price Retirement 2050 0.62% (Investor Class).
- Who it suits: people who want one fund in a retirement account and do not plan to adjust it. It fits less well if you hold other funds alongside it or invest in a taxable account.
This page explains how the funds work and what they cost. It does not recommend a fund: the right year and provider depend on your plan's menu, your timeline and your other savings.
How the Glide Path Works
The glide path is the fund's planned stock-to-bond mix for each year. Early on the fund is mostly stocks, which can grow more but swing more. As the target year nears, the fund sells stock funds and buys bond and cash funds so a market drop near retirement does less damage. The asset allocation changes for you, so you do not have to rebalance by hand.
The biggest design choice is what happens at the target year. The US Department of Labor describes two approaches:
- "To" glide path: the fund reaches its most conservative mix at the target date and stays there.
- "Through" glide path: the fund keeps cutting stock exposure after the target date and reaches its most conservative mix years later.
The SEC's investor bulletin adds that "to" funds typically switch to more conservative investments earlier than "through" funds, so at many points along the way a "to" fund holds lower-return, lower-risk investments. The three 2050 funds below whose glide paths we checked (Vanguard, Schwab and T. Rowe Price) all keep shifting after 2050, which makes them "through" designs, but they stop at different points and hold different amounts of stock along the way. Two funds with the same year are not the same fund.
2050 Funds Compared: Fees and Glide Paths
We compared the 2050 fund from four large providers, using each fund's own fact sheet or summary prospectus. We used the 2050 fund for all four so the numbers line up; each provider offers funds for other years too.
| Fund (ticker) | Expense ratio | Stock share now | Glide path after 2050 |
|---|---|---|---|
| Vanguard Target Retirement 2050 (VFIFX) | 0.08% (as of 01/28/2026) | About 90% in two stock index funds (fact sheet, Sept 30, 2026) | Mix becomes similar to Vanguard's Target Retirement Income Fund within seven years after 2050 |
| Schwab Target 2050 Index (SWYMX) | 0.08% after expense reduction (0.13% before) | About 89.3% (Feb 1, 2026) | About 44.0% stock at 2050; keeps cutting for 20 years, then fixed at about 28.0% stock |
| Fidelity Freedom 2050, actively managed (FFFHX retail, FFPFX Premier) | 0.68% (FFFHX); 0.37% (FFPFX, $1 billion minimum initial investment) | Not covered here | Not covered here |
| T. Rowe Price Retirement 2050 (TRRMX, Investor Class) | 0.62% | 96.59% neutral equity allocation (Aug 1, 2026) | 55% stock at 2050; keeps cutting until about 30 years after 2050 |
Notes. Vanguard's stock share is our sum of its two stock funds (Total Stock Market Index 54.0% and Total International Stock Index 36.2%). Schwab charges 0.13% before a 0.05-point expense reduction. FFFHX and FFPFX are two share classes of the same Fidelity fund with different fees. We did not include Fidelity's stock share or glide path because we could not re-read them in a primary source this round, and we left out Fidelity Freedom Index 2050 for the same reason.
Hypothetical example (our arithmetic, not a forecast): on a $10,000 balance, a 0.08% expense ratio costs about $8 a year and a 0.68% ratio about $68 a year. The gap grows with the balance and compounds over decades. The Department of Labor puts it plainly: "Small differences in investment fees and costs can have a serious impact on reducing long term retirement savings."
Stock share matters as much as cost. A fund with more stock at the target year can grow more but can also fall further just before or after you retire. Compare the stock share at the target year (55% for T. Rowe Price, about 44.0% for Schwab) with how much risk you could live with at that age.
Target-Date Fund vs Index Fund
This is a common question, but the two are not opposites. Index-based target-date funds such as Vanguard's and Schwab's are built from index funds. The difference is who sets and moves the mix.
- Target-date fund: one fund, a mix set by the provider, rebalanced and de-risked for you. You pay the fund's expense ratio, which includes the costs of the funds inside it.
- Your own index funds: you choose the mix (for example a US stock fund, an international fund and a bond fund), rebalance it yourself and decide when to shift toward bonds. Costs can be as low as or lower than an index target-date fund, but you do the upkeep. See VTI vs VOO and VOO vs VXUS for the building blocks, and active vs passive investing for the index-versus-active question.
If you would rebalance on schedule anyway and want a different stock share than the providers use, your own mix gives you that control. If you would not, the target-date fund does the job you would skip.
Who It Suits, and Who It Does Not
Tends to fit:
- You want a single fund in a 401(k), 403(b) or IRA and do not plan to check it often.
- Your plan offers a low-cost target-date series (check the expense ratio on your plan's fund page).
- Most of your retirement savings sit in that one account.
Fits less well:
- You hold other funds next to it. A target-date fund is built to be the whole portfolio. Adding a stock fund on top changes your total stock share in a way the glide path cannot see. Our portfolio overlap tool shows how much your funds repeat each other.
- Taxable brokerage accounts. When the fund rebalances, it can pay out capital gains you owe tax on that year, even if you sold nothing. In an IRA or 401(k) that does not apply. See brokerage vs IRA.
- Your risk tolerance differs from the fund's. If the 2050 fund feels too aggressive or too cautious, you can pick an earlier or later year, but then the timing no longer matches your retirement.
- Federal employees: the TSP has its own target-date funds, the L Funds. Our TSP funds guide covers them.
Why It Is the Default in Many 401(k) Plans
Federal rules let a plan put workers who make no choice into a "qualified default investment alternative" (QDIA). The Labor Department rule (29 CFR 2550.404c-5) names a "life-cycle" or "targeted-retirement-date" fund as an example. That is why many workers who are auto-enrolled end up in a target-date fund without picking it.
Vanguard's How America Saves 2026 shows how common this is in the plans Vanguard administers (these figures cover Vanguard plans only, not all US plans), at year-end 2025:
- 96% of plans offered target-date funds, and 84% of participants in those plans used them.
- 89% of plans designated a QDIA, and 98% of those defaults were target-date funds.
- 61% of participants held a single target-date fund as their whole account.
- Target-date funds held 45% of plan assets on average and received 64% of contributions.
Being the default does not make a fund the right one for you. Check which series your plan uses and what it costs. Our 401(k) guide covers the rest of the plan rules.
Sources & Methodology
- Vanguard Target Retirement 2050 Fund fact sheet (September 30, 2026), for the expense ratio, underlying funds and post-2050 glide path.
- Schwab Target 2050 Index Fund summary prospectus (July 28, 2026), SEC EDGAR, for fees and allocations.
- Fidelity Freedom 2050 Fund summary prospectuses (May 30, 2026), SEC EDGAR, for the FFFHX and FFPFX expense ratios.
- T. Rowe Price Retirement 2050 Fund summary prospectus (August 1, 2026), SEC EDGAR, for fees and the glide path.
- US Department of Labor, Target Date Retirement Funds: Tips for ERISA Plan Fiduciaries (February 2013), for the "to" and "through" definitions and the fee quote.
- SEC Investor.gov, Investor Bulletin: Target Date Retirement Funds, for glide path types.
- 29 CFR 2550.404c-5 (eCFR), the qualified default investment alternative rule.
- Vanguard, How America Saves 2026, for plan and participant use of target-date funds (Vanguard plans, year-end 2025).
Method notes. Expense ratios are each fund's total annual operating expenses as stated in its own document, for the share class named. Vanguard's stock share and the $10,000 fee example are our own arithmetic. Allocations are as of the dates shown and change every year as each fund moves along its glide path. All figures were checked against these sources on 2026-11-10.
This article is for general information and is not financial advice. Fund fees and allocations change; check the current prospectus before you invest. Past performance does not guarantee future results, and the fee example is hypothetical.
FAQ
What is a target-date fund in simple terms?
One fund, named for a year, that holds stocks and bonds and slowly moves from mostly stocks to more bonds as that year approaches. The provider does all the rebalancing.
How do I pick the year?
Most people pick the fund closest to the year they expect to retire or start withdrawing. Choosing a later year means more stock for longer; an earlier year means less. Check the fund's stock share at its target year, not only the year in its name.
What does a target-date fund cost?
It varies widely. Among the 2050 funds we checked, Vanguard and Schwab's index funds cost 0.08% a year (Schwab after a fee reduction), T. Rowe Price's Investor Class 0.62% and Fidelity Freedom 2050's retail class 0.68%.
What is the difference between a "to" and a "through" glide path?
A "to" fund reaches its most conservative mix at the target date. A "through" fund keeps reducing stock for years after it. Schwab's 2050 fund keeps cutting for 20 years after 2050, T. Rowe Price's until about 30 years after.
Can I hold two target-date funds?
Nothing stops you, but each fund already holds a full mix, so two funds mostly blend two glide paths. If you want something in between, picking one year is simpler.
Can I lose money in a target-date fund?
Yes. Its value moves with the stock and bond markets, including at and after the target date. The fund lowers risk over time; it does not remove it.
Is a target-date fund better than an index fund?
Neither is better in general. A target-date fund is a ready-made mix that often contains index funds. Your own index funds give you more control but need you to rebalance. See the comparison above.
