What is a target date fund?
Taking the guesswork out of retirement saving
You’re ready to grow your retirement savings, but the thought of investing can be daunting. Fortunately, there are all-in-one investment options that are tailor-made for retirement and help you invest for the long-term. They’re called target date funds, and they work by putting your money into a mix of stocks and bonds that automatically changes as you get closer to retirement.
When we’re young, we have years ahead of us, so we may be willing to take more risk as we endure the typical ups and downs of the market. But as we get older, we may look to start reining in the risk to help protect our savings. Target date funds can help you do just that.
A 30-year-old personal support worker planning to retire at age 67 might invest in a target date 2055 fund. As the worker moves closer to the target date of 2055, the fund will automatically be rebalanced so it becomes more conservative, with fewer stocks, which are generally riskier but bring higher expected returns, and more bonds, which is generally less risky but brings lower expected returns.
Who provides target date funds for my65+?
my65+ offers LifePath Target Date Funds from BlackRock, the world’s largest asset manager that pioneered target date funds in 1993. BlackRock has over $10 trillion USD in assets under management, including managing over C$275 billion in assets for Canadian clients.
With my65+, you can choose from nine BlackRock target date fund options, all of which are highly diversified and less costly than the average Canadian mutual fund.i The key difference among the nine different target date fund options lies in the target retirement year that each fund has been constructed for and thus the corresponding asset allocation mix. BlackRock’s target date funds are a simple way to invest for retirement. The benefits of choosing to grow your retirement savings by investing it in a target date fund includes:
- Having access to a diversified asset allocation for as long as you are invested in the fund, helping you avoid overly risky or excessively conservative investments of your retirement savings with minimal effort on your part and at a low cost
- Automatic rebalancing for risk: risk is decreased as you approach retirement
- Automatic rebalancing for asset allocation: to help mitigate against swings in the markets
i Morningstar, “Global Fund Investor Experience Study” (2019)