Review target-date funds beyond the year in their name. Compare glide paths, holdings, fees and workforce needs, then document ongoing oversight.
October 12, 2026 · Financial Forte Staff
Historical article: prepared retrospectively using information available as of October 12, 2026.
A target-date fund's year can make it look easy to understand: choose the date nearest retirement and let the fund adjust over time. That simplicity can help participants, but it should not make the plan committee's review superficial. Funds with the same date can hold different investments, take different risks and charge different fees.
Evaluate the fund's strategy and its fit with the workforce, then document an ongoing monitoring process. For an ERISA plan, selecting a familiar name or a popular default does not replace prudent fiduciary review. The committee needs to understand what participants are being offered and how that offering may behave as retirement approaches.[1]
Understand the path before comparing the label
A target-date fund generally changes its asset mix over time along a glide path. A “to retirement” approach reaches its most conservative allocation around the target date, while a “through retirement” approach continues changing after that date. Those broad descriptions still leave important differences in the actual stock, bond and other exposures.[1]
Ask when the fund reaches its most conservative point and how much investment risk remains then. The target date is not a maturity date or a guarantee that the principal will be protected. Participants can lose money at or after the date in the fund's name.
Review the underlying investments and the manager's implementation. Determine whether the fund uses affiliated or unaffiliated investments, active or index strategies and any less familiar asset classes. The committee should be able to explain the principal risks without relying entirely on the provider's marketing summary.
Compare risk with a controlled example
Compare two hypothetical funds with the same target year. At the point being reviewed, Fund A holds 60% in stocks and Fund B holds 40%. For an $800,000 participant balance, that represents $480,000 of stock exposure in A and $320,000 in B.
Assume a simplified scenario in which the stock portion falls 25% and every other holding is unchanged, ignoring fees and rebalancing. A loses $120,000 and ends at $680,000. B loses $80,000 and ends at $720,000. The $40,000 difference ($720,000 less $680,000) results from the assumed allocation and price change, not from the date printed on the fund.
This is not a forecast or a recommendation that the lower stock allocation is always preferable. In a rising stock market, the comparison could favor the higher allocation under equivalent assumptions. The committee's question is which strategy and risks fit the plan's intended role and participant population, not which fund wins one invented scenario.
Consider workforce characteristics such as likely retirement timing, withdrawal patterns, contribution behavior and access to other retirement income. Aggregate information can inform the review without pretending the committee knows each participant's complete household finances. One default investment cannot be customized to every employee's outside assets and preferences.
Compare fees without skipping the investment differences
Identify the fund's total expenses and understand whether underlying fund costs are already included in the disclosed figure. Avoid double-counting expenses or comparing an all-in figure with a partial quote. Also distinguish investment expenses from separate recordkeeping, advisory or other plan charges.[1][2]
Suppose a hypothetical plan has $20 million allocated across a target-date series. An annual expense ratio of 0.60% would represent approximately $120,000 at a constant asset level. A 0.15% expense ratio would represent $30,000, a $90,000 difference ($120,000 less $30,000) before changes in assets. That is a meaningful cost comparison, but it does not establish that the two investment strategies and services are equivalent.
The committee should ask what any additional cost provides and whether it is reasonable for the services and investment approach. A higher fee is not proof of better results, and the cheapest available option is not automatically the prudent choice. The reasoning should be supported by a fair comparison and retained in the review record.
Custom or nonproprietary approaches may be worth evaluating for some plans, but they can add expense and administrative work. Size, governance resources and the available investment platform affect the decision. Do not assume a more elaborate structure creates value merely because it is customized.
Monitor the selection and explain it clearly
Set a periodic review process and identify events requiring earlier attention, such as a material strategy change, management change, fee change or persistent implementation concern. Evaluate performance against the strategy and appropriate comparisons rather than replacing a fund solely because another series recently led a ranking.
If the series is used as a qualified default investment alternative, confirm the applicable selection, notice and operational requirements. Default status does not eliminate the fiduciary responsibility to prudently select and monitor the investment. The committee should understand which responsibilities have been delegated and which remain with the plan.[1]
Participant communication should explain the changing allocation, continuing risk and the role the fund is intended to play. Employees who combine a target-date fund with several other investments may create a total allocation different from what they expect. Offer education and an appropriate route for individual advice without prescribing one investment for every household.
Document the information reviewed, alternatives considered, decision and follow-up. A record that says “retained because returns were good” is less useful than one explaining how costs, risk, workforce fit and implementation supported the decision. If concerns remain, assign an owner and date for resolution, with the required evidence for closing the item.
For the next committee meeting, request a one-page comparison of glide paths, underlying holdings and total expenses for the current series and relevant alternatives. Pair it with the workforce assumptions being used. That gives the committee a concrete basis for a decision that goes beyond matching a retirement year to a fund name.
Related reading
Have more questions about target-date investments and plan fiduciary reviews? Email Dave at dave@financialforte.com to discuss your questions and next steps.
The contact invitation is current; it does not imply this contact path existed on the historical reference date.
Educational information, not personalized investment, tax, legal or benefits advice. Examples use hypothetical assumptions. Verify current rules and your circumstances before acting.
