Target-Date Fund
RetirementGlossary term
Definition
A mutual fund that automatically adjusts its asset allocation from aggressive to conservative as a target retirement year approaches. Often used as a simple, hands-off investment option in 401(k) plans.
Related terms
- Glide PathThe gradual shift in a portfolio's asset allocation from aggressive (more stocks) to conservative (more bonds) as the investor approaches retirement. Target-date funds use predetermined glide paths to automatically adjust risk over time.
- Asset AllocationAn investment strategy that balances risk and reward by dividing investments among different asset categories, such as stocks, bonds, and cash, based on goals and risk tolerance.
- 401(k)A tax-advantaged retirement savings plan offered by employers that allows employees to contribute a portion of their salary before taxes. Many employers offer matching contributions up to a certain percentage.
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