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Are Target Date Funds Putting Your Retirement at Risk?

September 2, 2025

When you think of your investment portfolio, would you consider it to be aggressive, moderate, or conservative? If you don't know the answer, that's OK — but I strongly recommend investigating! The difference could have a profound impact on your long-term financial health.

If you participate in your employer’s workplace retirement plan, you’ve likely encountered the investment fund options commonly referred to as Target Date Retirement Funds. These funds can be attractive investment options for employees who do not want to actively manage their retirement savings.

The “target date” is often incorporated in the name of the fund. For example, “Target Date 2055” is designed for individuals who intend to retire around the year 2055. As employees get closer to that date, the fund will automatically rebalance to become increasingly conservative (i.e. decrease stock exposure while increase bond exposure).

One of the core pillars of a robust investment plan is asset allocation. This is how investors divide their portfolio amongst stocks, bonds, and cash, with the aim of balancing risk and reward based on their individual goals, risk tolerance, and time horizon.

A recent Wall Street Journal article highlights how more asset managers are adopting higher allocations to stocks in target date funds, making them inherently riskier, regardless of the retirement date. With the stock market repeatedly hitting all-time highs, this has been beneficial for target date fund investors.

But what happens when the music stops?

A few thoughts:

1. The one-size-fits-all approach of target date funds ignores the unique circumstances of individual investors, which can lead to asset allocations that do not align with an investor’s needs (i.e. too aggressive or too conservative). Personal finance is personal, and everyone’s situation is unique.
2. It’s important to understand the composition of these funds. Are they structured in a way where they are truly diversified to weather the next recession or crisis?
3. Target date funds often have higher expense ratios than simple index funds due to active management, which can reduce returns over time.

At One Day In July, we prioritize ensuring all your investment accounts have an asset allocation that’s truly diversified and tailored to your individual circumstances.

- Chris McKeown