Understanding target date portfolios

When it comes to saving for retirement, one of the biggest decisions you’ll make is how to invest your pension savings. Target date portfolios are designed to make that decision simpler.

What is a target date portfolio?

A target date portfolio — often referred to as a “target date fund” — is a professionally managed investment portfolio designed to support long-term retirement savings.

Rather than requiring you to actively manage your investments, target date portfolios are professionally managed and automatically adjust as you get closer to retirement.

How do target date portfolios work?

Each portfolio is built around an expected retirement year, and you simply choose the portfolio with the target date closest to when you expect to retire. For example, if you hope to retire around 2055, you’d likely choose a 2055 target date portfolio.

Each portfolio holds a diversified mix of investments that is managed on your behalf. Over time, the investment mix automatically shifts to reflect the number of years remaining until your expected retirement.

When you’re many years from retirement, the portfolio generally focuses more on long-term growth and can take on more investment risk. As retirement approaches, it gradually shifts to a more conservative mix of investments to help manage risk.

This transition happens automatically, so your portfolio continues to evolve over time without you needing to make ongoing changes.

Why are target date portfolios popular for retirement investing?

Because they’re professionally managed and automatically adjust over time, target date portfolios have become one of the most popular investment options.

Some of the benefits of target date portfolios include:

• Professional management – Investment professionals manage the portfolio on your behalf.
• Automatic adjustments – Your investment mix automatically evolves over time as you move closer to retirement.
• Diversification – Your savings are invested across a range of asset classes to help manage risk.
• Simplicity – You don’t need to manually decide when or how to adjust your investments.

Are target date portfolios right for everyone?

Target date portfolios can be a good option for many, but some investors prefer to make their own investment decisions or have personal circumstances that may require a different approach.

Although target date portfolios are built around an expected retirement year, the portfolio that’s right for you may also depend on your investment goals and comfort with risk.

If you’re unsure whether a target date portfolio is right for you, contact us to learn more about your investment options and choose an approach that aligns with your goals.

Disclaimer:

Target date portfolios are designed to gradually become more conservative as the target retirement year approaches. They do not guarantee retirement on a specific date, a particular income level, or any investment outcome. Market conditions, portfolio allocation, and individual circumstances may affect results. You should consider your overall financial situation, including your investments, debts, risk tolerance, time horizon, and personal circumstances, and may wish to consult a qualified financial advisor.

The term “Target Date Fund” is an industry-standard term used to describe a professionally managed retirement investment strategy. In this context, it does not necessarily refer to a separate fund structure, but rather to a target-date portfolio that combines a diversified mix of underlying investments and adjusts over time based on an investor’s expected retirement date.