A target date fund is a great way to save for 401k retirement but what is the actual composition? I understand that they're split between bonds and stocks but how does somebody actually introspect the fund to see what mutual funds, stocks and bonds are inside the fund?

Basically I wanted to know why I shouldn't do something like buy x% in VOO and y% in blv and just leave it.


2 Answers 2


Every time I have looked at a target date fund they have presented the prospectus in one of two ways:

  • An individual document for each of the target dates (2005,2010,2020...2055,2060) or
  • A single prospectus document covering all the target date funds.

In reality if they go the first route you will discover that 90% of the individual documents for those family of target date funds are the same.

In general each of the target date funds is picking from the same basket of funds, the only difference is that they are allocating a different percentage to the funds in the basket.

You will see the same thing done with 529 plans. As the child get closer to college the percentages change to become more conservative.

You can do this. Inside of an IRA this is easy to mimic the percentage of stock, bonds, and even things like international, a real estate. It gets harder if the number of funds is large, or if they decide to not 100% follow the broad glide path they have described.

According to the 2050 prospectus]2050p:

The target allocations assigned to the broad asset classes (Stocks and Bonds), which reflect these tactical decisions resulting from market outlook, are not expected to vary from the neutral allocations set forth in the glide path by more than plus (+) or minus (-) five percentage (5%) point

The 2050 target date fund is invested in 22 T Rowe price funds. They update the information every quarter.


Broadly, the benefit of a target date fund is that a professional is picking a blend of funds and adjusting the blend of funds over time as you get closer to the target date. You could absolutely do this yourself (probably at a lower cost) assuming you are comfortable doing things like figuring out how much of your portfolio should be in bond funds as your retirement date approaches, rebalancing your portfolio periodically, etc.

If you're a 40 year old looking to retire in 25 years, there are various rules of thumb for how much of your portfolio should be in stocks. One such rule is 120-age so a 40-year old would have 80% stocks, a 45-year old would have 75% stocks, etc. A target date fund that followed that rule mechanically (I can't imagine that any fund would actually do so, this is just for illustration) would move 1% of the portfolio from stocks to bonds every year so that you get more stability as retirement approaches. The fund company generally charges a small fee for doing that. If you're the sort of person that doesn't want to spend time managing your money and just want to put the cash in a single fund and let the pros handle it, a target date fund makes sense.

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