In 2025, target-date funds continued along three trends that made investors relatively happy.
For one thing, they’ve gotten bigger. A report released earlier this month by investment research firm Morningstar found that the total amount invested by investors in these funds reached $4.8 trillion in 2025, largely due to last year’s rally in stock and bond markets. As a group, target-date funds have grown 11.9% annually over the past five years.
The price has also become cheaper. The fund’s annual expense ratio in 2025 will average 0.27%, down from 0.29% the year before and 0.55% in 2015, according to the report.
Finally, these funds are becoming more aggressive, with more of them on average exposing investors to higher allocations of stocks over longer periods of time, Morningstar reports. The asset mix that’s right for you will depend on your tolerance for risk, but in general, portfolios with a higher proportion of stocks tend to outperform portfolios that lean more towards bonds over the long term.
Long term is key with target date funds. These investments are designed to be an all-in-one portfolio: money you hold from the time you invest until retirement. And you’ll likely be invested in one of these funds for decades, experts say, and factors like fees, performance and investment mix can make a big difference.
“Many people don’t think much beyond the name of a fund,” says Larry Luxenberg, a certified financial planner with Lexington Avenue Capital Management. “Target-date funds are designed to be simple, but there’s still work to do to make sure it’s right for you.”
How to choose a target date fund
Target date funds are designed to be dynamic portfolios that grow with you over time. The idea is to choose a fund with a date in its name that roughly corresponds to the year in which you want to retire. The fund holds a mix of stocks, bonds, and cash, and becomes more conservative as you get older.
When you’re young and want to save money, your portfolio leans toward fast-growth stocks. As you get older and want to protect your savings, your portfolio shifts to less volatile bonds and cash.
No two target date funds are exactly alike. Funds from different families hold different mixes of assets that change over time. You will also be charged a separate fee.
If you have a target-date fund in a workplace plan, such as a 401(k), you can only choose one fund family. Still, it may be worth looking inside and reviewing your portfolio with a financial professional, experts say. In general, we recommend that you consult a financial professional before making any changes to your portfolio.
However, you should be especially careful when investing through your personal retirement or brokerage account, as you can invest in virtually any fund. In addition to your desired retirement year, here are three factors financial experts say you should pay attention to.
1. Underlying investment
Target date funds are what are called “funds of funds.” In other words, target-date funds include a roster of mutual funds that make up the ultimate portfolio. Very broadly speaking, it’s important to know what type of funds those funds are in order to know exactly what you’re paying for, says Joon Am, a CFP at financial firm Secure Tax & Accounting.
“Some funds use low-cost index funds, while others are more actively managed,” he says.
Crystal Cox, CFP and senior vice president at Wealthspire Advisors, says it’s also wise to understand the different “flavors” of stocks and bonds in your portfolio and make sure you’re comfortable with the investment amount for each when you buy.
“What’s the ratio of stocks to bonds? Is it 60/40? 70/30? You have to ask yourself what’s right for you,” she says. “The same goes for U.S. stocks and foreign stocks, etc.”
You can usually find a breakdown of a fund’s holdings by downloading a prospectus from the fund company’s website or by searching for the fund on an investment research site such as Morningstar.
2. “Glidepath”
Keep in mind that the composition of your portfolio will change from the time you purchase the fund, possibly up to the year you plan to retire. A planned transition to a fund’s asset mix is known as a “glide path” and is typically depicted as a graph in a fund’s prospectus with a target date.
The most “aggressive” funds hold a higher percentage of stocks for the long term, while “conservative” funds tend to gravitate toward bonds.
Although many glide paths are similar, there can be significant differences from fund to fund. According to Morningstar’s 2026 Target Date Fund Landscape Report, many funds hold more than 90% of their portfolios in stocks at the start of the path, when the portfolio is at its most active and decades removed from the date in the fund’s name. However, some of the more stable funds hold close to 50%.
How you want your portfolio to behave over time depends on how comfortable you are with market volatility and how you plan to use your retirement funds. Both topics are worth consulting an expert, says Erica Safran, CFP at Safran Wealth Advisors.
“The question is how much risk do you want to take and how much risk do you need to take,” she says.
3. Expenses
When choosing a target-date fund, or any type of mutual fund, it’s important to pay attention to the expense ratio, which is the annual fee charged by the fund company to manage the portfolio, says Bill Schafranski, CFP at Moneco Advisors. That’s probably even more important than looking for the funds with the highest historical returns, he says.
“Don’t get me wrong, it’s great to look at past performance, but if you compare a fund with an expense ratio of 0.68% to a fund with an expense ratio of 0.35%, there’s a big difference in how well you can maintain that return,” he says.
Target-date funds have an average expense ratio of 0.27%, according to Morningstar.
So how much difference does it make? Imagine an investor who invests $5,000 in a target-date fund and then invests another $5,000 a year for 40 years, earning an 8% annual return. If that investor chose a fund with a 0.35% expense ratio, he would pay about $140,000 in fees and end up with $1.37 million, according to NerdWallet’s mutual fund fee calculator.
If the same investor paid 0.68% annual expenses, he or she would have earned about $1.25 million, including $260,000 in fees.
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