What Is a To-Fund?

A to-fund is a type of target-date retirement fund whose asset allocation begins more aggressive and becomes most conservative at the fund’s target date. A to-fund might make sense for someone who expects to cash out their investmen𒈔t when the fund reaches the target date in order to purchase a dif💟ferent type of asset or investment.

A 2030 target date to-fund, would therefore become increasingly conservative up until the ﷺyear 2030, at which point it would remain at its most conservative allocation going forward.

How To-Funds Work

Target-date funds typically have a greater percentage of stocks relative to bonds the farther away the target date is.

A to-fund takes less risk than a "through" fund, and it may achieve lower returns as a result. The other big risk of using a to-fund is that if you hold it past the 澳洲幸运5官方开奖结果体彩网:target date, its lack of investment risk means your nest egg will not continue to grow and you could outlive your 澳洲幸运5官方开奖结果体彩网:retirement savings.

 To-Funds vs. Through Funds

Before investing in any target-date fund, investors should examine its glide path (how it progressively becomes more conservative) to determine how the fund’s asset allocation changes over time and whether it is a "to" fund or a 澳洲幸运5官方开奖结果体彩网:"through" fund.

A “to” target-date 2045 fund might have a glide path that results in an asset allocation of 0% stocks and 100% bonds and short-term funds in 2045, whereas a “through” 2045 target-date fund might still be invested 60% in stocks with the remaining 40% in bonds and 澳洲幸运5官方开奖结果体彩网:short-term funds. The "through" fund’s percentage of stocks would continue to decrease gradually after the target date so that, during retirement, the percentage of ꧅bonds and cash equivalents would continue to increase. The to-fund’s asset allocation would♋ not change after reaching the target date. 

Special Considerations

Target date funds are popular these days and have become the go-to of many company retirement and 401(k) plans. According to Barron's, Americans had $2 trillion in target-date strategies as of 2021. Comparatively by the end of 2008, target-ꦍdate funds had only amassed $158 billion in total assets.

These funds aren't for everyone, however. Their expenses tend to be higher than index funds and other passive investments. Their holdings may duplicate other parts of an individual's portfolio,🧜 and some of them may invest too conservatively for long-term investors. It also may be difficult for investors to determine whether a particular fund is a "to" or "through" without pouring over lengthy prospectus documents. If in doubt, call the fund and ask.