Target-date and target-risk funds

Target-date and target-risk funds offer an all-in-one way to manage retirement savings, asset allocation, and diversification.

What are target-date and target-risk funds?

Your retirement plan may offer target-date or target-risk funds. These funds are designed to be an all-in-one option, meaning that if you invest in a target-date or target-risk fund, you don’t need to invest in any other investment in your retirement plan. That may sound strange, but these funds are meant to take investment selection, diversification, and risk management off your shoulders. Let’s look at the specifics.

Target-date fund details

Target-date fund names include years, which are generally spaced in five- or ten-year increments. The fund you choose should correspond to the year closest to when you plan to retire or start withdrawing money. That’s the target date. What does the fund do for you?

  • It contains a diversified mix of investments that reflect appropriate risk based on your retirement date.
  • It automatically rebalances over time, and investments gradually become less exposed to risk as you get closer to retirement. This is called the glide path. 
  • Glide paths can be “to” or “through” retirement. Glide paths “through” retirement tend to have more exposure to stocks for five to ten years after the target date. See the prospectus for the fund’s strategy. 

Savers who are fully invested in target-date funds see, on average, better long-term performance compared to self-directed investors.1 Keep in mind, the principal value is not guaranteed at any time, including at the target date. An asset allocation strategy doesn’t guarantee performance or protect against investment losses. A “fund of funds” has an additional level of expenses.

Target-risk fund details

Target-risk funds are managed to meet a certain risk tolerance rather than a specific target date. You choose a fund based on the amount of risk you prefer. The funds generally are labeled as conservative, moderate, and aggressive/growth. How does each fund work?

  • It contains a diversified mix of investments tailored to your risk tolerance.
  • The asset allocation stays at your chosen risk level. It doesn’t get more conservative over time.
  • It’s good practice to periodically assess your risk tolerance to determine if the portfolio’s risk level still meets your needs.

Combined target-date and target-risk portfolios

These portfolios are just what they sound like; they combine the features of target-date and target-risk funds. You choose a portfolio that corresponds to your target retirement date and your risk tolerance. It’s rebalanced periodically and becomes more conservative as you get closer to the target date.

All-in-one investment solutions

Target-date and target-risk funds take the investment decision-making out of saving for retirement. They handle specific investment decisions and diversification for you. Remember, they’re designed to let you invest 100% of your retirement plan assets in the fund. 

Log in to your account now to review your investments, and talk to your retirement plan representative to get answers to your questions. 

1 Alight Solutions, The Impact of Managed Accounts and Target Date Funds in Defined Contribution Plans, 2018.

This material is provided by The Lincoln National Life Insurance Company, Fort Wayne, IN, and, in New York, Lincoln Life & Annuity Company of New York, Syracuse, NY, and their applicable affiliates (collectively referred to as “Lincoln”). This material is intended for general use with the public. Lincoln does not provide investment advice, and this material is not intended to provide investment advice. Lincoln has financial interests that are served by the sale of Lincoln programs, products and services.