What does the date in a target date fund name mean?
The date in a target date fund name generally means the date at which the “typical” investor for whom that fund is designed would reach retirement age and stop making new investments in the fund. Target date does not mean the date at which an investor should cash out the entire target date fund investment. Generally, target date funds are designed to be held beyond the presumed retirement date, to offer a continuing investment option for the investor in retirement. Target date also does not typically mean the date at which the fund arrives at its most conservative asset allocation. Many target date funds do not reach their most conservative asset allocation until after the target date. Investors may choose to purchase target date funds with dates other than their presumed retirement date. An investor who expects to retire in 2035, for example, might select a 2030 fund (to be more conservative) or a 2040 fund (to be more aggressive).
