Target Date Fund

A target date fund is a mutual fund that automatically shifts the fund owner's asset allocation over time. Target date funds are sometimes referred to as lifecyle funds--not to be confused with life-cycle investing. The "target date" is typically an approximate retirement date for the owner--for example, a 2030 fund. Asset allocations are generally more aggressive and equity-oriented for younger investors. The asset allocation will become less aggressive and more oriented towards fixed income investments as the participant ages. The Pension and Protection Act of 2006 allows target-date funds to serve as a default option in 401k plans, resulting in a significant increase in participation rates. Target-date funds have been the subject of some criticism and controversy in the wake of the financial crisis as many of the presumably more conservative funds for near-retirees suffered meaningful losses.