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What are Target Retirement Date Funds?

If you're looking for a simple way to invest for retirement, a Target Retirement Date Fund may be a good option for you!

A Target Retirement Date Fund – also called a Target Date, Lifecycle, or Age-Based Fund – is a low-maintenance, pre-diversified investment option designed to grow more conservative as you approach your “target” date – the date you plan to retire and begin using the money, often age 65. You can learn more about Target Retirement Date Funds by watching this video.

In the UW TSA 403(b) Program, Target Date Funds are set up in five-year increments. If you are using Target Date Funds, when you are farther away from retirement the underlying investments in your fund – also called your “asset mix” – are more growth-oriented, with a higher percentage of stocks. As your target retirement date gets nearer, the asset mix gradually gets more conservative by reducing the percentage of stocks and increasing the percentage of bonds and other more conservative investments.

Target Date Funds have many benefits. This one-fund option:

    • contains a diversified mix of investments in a single fund that is regularly managed based on your personal retirement timeline,
    • provides automatic rebalancing and automatic adjustment of your asset allocation as your investment time horizon grows shorter, and
    • is especially suited for those who are not as investment-savvy or those who may not want to take the time to rebalance their investments themselves.

As with any investment, make sure to review your account as needed to assess your investment mix, making sure it matches your risk tolerance and provides returns that meet your needs. Bear in mind that like any mutual fund, a Target Date fund is subject to risk. The value of your principal (or starting investment) is not guaranteed at any time – not even in the target year.

Where can I learn more? To learn more about the target retirement date funds and the UW System Tax-Sheltered Annuity (TSA) 403(b) Program, please visit the UW TSA Program web page. For a basic introduction to the program, attend the Save Smart, Save Early webinar on Monday, May 24. Registration details are provided in the Education section of the TSA web page. If you're unable to attend on that date, there may be other times available – check back regularly! If you’re interested in other financial wellness opportunities, visit the Employee Well-being Webinars page.


Source: UW System Office of Trust Funds