Short answer: A target-date fund holds a mix of stocks and bonds that becomes more conservative as its target retirement year approaches. In the SEC’s prospectus fee data (2025 Q3 to 2026 Q2), index-based target-date funds charged a median of 0.09% a year in their cheapest share class, compared with 0.39% for other target-date funds.
A target-date fund is the closest thing investing has to an autopilot. You pick the fund with the year you expect to retire in its name, and it handles the rest: the mix of stocks and bonds, the rebalancing, and the gradual shift toward safer investments as that year approaches.
For millions of Americans, it’s also the default. If you were automatically enrolled in a 401(k), there’s a good chance your money went into one.
But not all target-date funds are alike, and the biggest difference between them is one that’s easy to miss: whether the funds inside are index funds or actively managed ones. We looked at what target-date funds themselves report to the U.S. Securities and Exchange Commission to see how much that choice costs.
The short version: index-based target-date funds charge a median of 0.09% a year in their cheapest share class. Other target-date funds charge a median of 0.39%, and the gap is wider still in the share classes many investors actually hold.
How a target-date fund works
Investor.gov, the SEC’s investor education site, describes them this way: “Target date funds are investment funds that hold a mix of investments, such as stock, bond, and other investment funds.” It adds that “a target date fund is typically a fund of funds,” meaning it owns shares of other funds rather than individual stocks and bonds (Investor.gov).
Three ideas explain almost everything about them:
- The target date. “The year in the name of a target date fund typically refers to the fund’s target date,” usually the year you expect to retire. A 2050 fund is designed for someone retiring around 2050.
- The glide path. Over time, the fund moves from mostly stocks to more bonds. In the SEC’s words, “the timing of this shifting is called the glide path.”
- “To” or “through”. Some funds stop changing at the target date; others keep getting more conservative for years after it. According to Investor.gov, funds with a “to” glide path “shift their investment mix just until the target date and generally not past that date,” while those with a “through” glide path “shift their investment mix up to and past the target date.”
An example: what a 2050 fund holds
The Vanguard Target Retirement 2050 Fund is one of the largest target-date funds. At the end of March 2026, according to its semiannual report filed with the SEC, it held just four Vanguard index funds: a total U.S. stock market fund (about 52% of the portfolio), a total international stock fund (about 37%), a total U.S. bond fund (about 7%) and a total international bond fund (about 3%). Its total expense ratio was 0.08% (SEC filing).
The same company’s Target Retirement Income Fund, built for people already retired, held roughly 30% in stocks and the rest in bonds and inflation-protected securities.
That’s the whole idea: one fund that does what a three-fund portfolio does, and adjusts it over time for you.
How popular they are
Target-date funds have become the standard choice in workplace retirement plans. Vanguard’s How America Saves 2026 report, which covers the plans it administers, found that “ninety-six percent of Vanguard plans offered target-date funds at year-end 2025,” and that “eighty-four percent of participants used target-date funds when offered” (Vanguard).
One reason: they’re the usual default investment. The U.S. Department of Labor notes that “many plan sponsors decide to use TDFs as their plan’s qualified default investment alternative (QDIA),” the investment used for participants who don’t choose one themselves (DOL).
What we counted
Every registered fund files an annual report with the SEC called Form N-CEN, which includes a question on whether the fund is a target-date fund. We took each fund’s most recent report filed between the third quarter of 2025 and the second quarter of 2026, the same census behind our count of how many index funds there are. For costs, we used the fee data funds file with their prospectuses.
Target-date funds rarely call themselves index funds on that form, because they’re funds of funds. So we grouped them by name and family instead: series with “Index” in the name, plus Vanguard’s Target Retirement funds and State Street’s Target Retirement funds, which are built from index funds, count as index-based. Everything else, including series that mix index and active funds, counts as other. The grouping is approximate.
| All target-date funds | |
|---|---|
| Funds in our count | 554 |
| Total assets | about $2.1 trillion |
| Share of assets in index-based series | about 53% |
| Share of assets at Vanguard | about 35% |
A note on scope: this covers mutual funds registered with the SEC. Many 401(k) plans now use target-date strategies packaged as collective investment trusts (CITs) instead, which don’t file these reports. More on those below.
The cost difference
| Index-based series | Other series | |
|---|---|---|
| Funds with fee data | 90 | 381 |
| Median expense ratio, cheapest share class | 0.09% | 0.39% |
| Median expense ratio, most expensive share class | 0.35% | 0.96% |
| Median across all share classes | 0.18% | 0.64% |
| Share classes charging more than 0.50% | 11% | 63% |
| Share classes charging a 12b-1 fee | 29% | 46% |
Our calculations from SEC prospectus fee data. Groupings are based on fund names and are approximate.
Two things stand out.
First, index-based target-date funds are far cheaper. At the median, the cheapest share class of an index-based series costs less than a quarter of what the other series charge.
Second, the share class matters almost as much as the fund. The typical target-date fund in our data comes in 4 share classes, and in nearly half of them the gap between the cheapest and most expensive class is half a percentage point or more. The same fund, holding the same investments, can cost very different amounts depending on how you buy it. Many of the pricier classes include a 12b-1 fee that pays for distribution.
What that difference adds up to
Imagine $100,000 invested for 30 years, earning 7% a year before costs. At a 0.09% expense ratio, it would grow to about $742,000. At 0.64%, it would grow to about $636,000. The difference, more than $100,000, comes entirely from fees. (This is an illustration, not a forecast.)
The Department of Labor makes the same point in its guidance to plan sponsors: “Small differences in investment fees and costs can have a serious impact on reducing long term retirement savings.” Our guide to expense ratios explains how these fees are taken.
Some low-cost index-based series
| Fund (2050 vintage) | Expense ratio | Source |
|---|---|---|
| Vanguard Target Retirement 2050 Fund | 0.08% | Summary prospectus, January 28, 2026 |
| Schwab Target 2050 Index Fund | 0.08% (after a fee limit) | Summary prospectus, July 28, 2026 |
| State Street Target Retirement 2050 Fund, Class K | 0.09% (after a fee waiver until April 30, 2027) | Summary prospectus, April 30, 2026 |
| Fidelity Freedom Index 2050 Fund, Investor Class | 0.12% | Summary prospectus, May 30, 2026 |
| BlackRock LifePath Index 2050 Fund, Institutional Shares | 0.14% (after a fee waiver) | Summary prospectus, April 30, 2026 |
Figures change over time and some depend on fee waivers; check the fund’s current prospectus. Other share classes of the same funds can cost more: BlackRock’s Investor A shares of the same fund, for example, carry a 0.25% 12b-1 fee and a net expense ratio of 0.39%.
Even among index-based series, the glide paths differ. Schwab’s 2050 fund, for example, continues to reduce its stock allocation for 20 years after its target date, while Vanguard’s should resemble its retirement-income fund within seven years after 2050. Investor.gov puts it plainly: “Target date funds with the same target date may have different investment strategies and levels of risk.”
The CIT version in your 401(k)
If you look up your 401(k)’s target-date fund and can’t find a ticker symbol, it’s probably a collective investment trust. Investor.gov describes a CIT as “a pooled investment vehicle that combines the money of multiple investors into a single portfolio,” and notes that “unlike mutual funds, they generally are not regulated by the SEC” (Investor.gov).
They’ve become the main way target-date strategies are delivered in retirement plans. Morningstar’s 2026 target-date research found that CITs held 54% of target-date assets at the end of 2025, and noted that while they lack some of the transparency of mutual funds, “they usually come with lower fees” (Morningstar).
If your plan uses a CIT, its fee and allocation information will be in your plan’s fund fact sheet and fee disclosure rather than in an SEC prospectus.
Are target-date funds right for you?
They make sense if:
- You want one simple fund and don’t want to rebalance yourself.
- Your 401(k) offers a low-cost, index-based series.
- You’d otherwise be tempted to trade or chase performance.
Think twice if:
- The only target-date option in your plan is expensive. A mix of the plan’s cheapest index funds can do the same job for less.
- You hold other investments elsewhere. A target-date fund assumes it’s your whole portfolio, so combining it with other funds can leave you with a mix you didn’t intend.
- Your situation doesn’t match the date. Someone with a pension, or someone planning to retire very early or late, might want a different date or a different approach entirely.
And remember what they don’t do. The SEC notes that target-date funds structured as mutual funds and ETFs “do not guarantee that you will have sufficient retirement income.” They can lose money, including near and after the target date.
Common questions
Should I pick the fund for the exact year I retire? That’s the usual starting point. Some investors choose a later date for a bit more stock exposure, or an earlier one for less. The year is just a label for a particular mix of risk.
Can I hold a target-date fund plus other funds? You can, but it partly defeats the purpose. Most target-date funds are designed to be your entire portfolio.
Are index-based target-date funds riskier because they’re “passive”? No. Passive refers to how the underlying funds pick investments, not to how much risk the fund takes. The risk depends on the glide path: how much is in stocks at each point.
What about fees inside the fund? A target-date fund’s expense ratio usually includes the costs of the funds it holds, shown in the prospectus as “acquired fund fees and expenses.” Always look at the total annual operating expenses.
The bottom line
A target-date fund can be a sensible all-in-one investment, but cost matters as much as convenience. In the SEC data we looked at, index-based target-date funds typically cost a fraction of the alternatives, and the share class you end up in can matter almost as much as the fund itself. Before accepting your plan’s default, check two numbers: the expense ratio, and how the fund’s stock allocation changes as you approach retirement.
This article is general information based on public filings, not personal investment advice. See our Financial Disclaimer.
Sources and data notes
- SEC, Form N-CEN data sets, 2025 Q3 to 2026 Q2: target-date fund status, adviser and average net assets. Each fund’s most recent report; money market funds excluded.
- SEC, Mutual fund prospectus risk/return summary data sets: expense ratios and 12b-1 fees by share class. Index-based grouping by fund name and family is our own and approximate; medians and the dollar example are our own calculations. Our editorial methodology explains how we count.
- SEC, Investor.gov, Target Date Funds: Investor Bulletin and Collective Investment Trust.
- U.S. Department of Labor, Target Date Retirement Funds: Tips for ERISA Plan Fiduciaries.
- Vanguard, How America Saves 2026 (data for Vanguard-administered plans, year-end 2025).
- Morningstar, 2026 Target-Date Landscape.
- Fund documents on SEC EDGAR: Vanguard Target Retirement 2050 summary prospectus and semiannual report; Schwab Target 2050 Index Fund; State Street Target Retirement 2050; Fidelity Freedom Index 2050; BlackRock LifePath Index 2050.
Data as of the 2026 Q2 SEC data sets. Sources checked on October 1, 2026.