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Three Things You Might Not Know About Target Date Funds

We’re starting a new series on retirement topics to help you take an informed, active role in your retirement savings. First up: target date funds. We picked this topic because investing is important to making the most of retirement savings, but for many of us, it can be a scary idea.

  1. What’s a target date fund, anyway?

    Target date funds offer one-stop shopping for busy folks whose focus may not be on economic matters. All you have to know is approximately when you expect to retire. Target date funds are designed to hold all of your retirement plan assets in one single, diversified fund. Sixty-three percent of Purdue employees participating in a defined contribution retirement plan are part of a target date fund. If you don’t make investment elections when you enroll in a retirement plan, you’ll be defaulted into a target date fund. (You can review your elections through Fidelity’s website any time you like.)

  2. How does a target date fund work?

    To get the most out of a target date fund, you should put all your retirement plan assets in that fund. You can “set it and forget it” because the mix is rebalanced for you as you move along in your career. In other words, the fund automatically adjusts the asset allocation, so the closer you get to retirement, the more conservative the investments are.

  3. Am I making a mistake by putting all my eggs in one basket (i.e., choosing a target date fund)?

    No. Target date funds are diversified, so you don’t need to worry about spreading your assets between funds. If you choose a target date fund, you’ll get the best return on your investment by investing all your retirement assets there. If only part of your investments are in a target date fund, it’s very possible that you’re getting lower returns – and so you’re saving less than you could be for retirement.

For those participating in a Public Employee Retirement Fund (PERF) retirement plan, you can choose to invest your Annuity Savings Account in target date funds that are offered by INPRS.

If you have questions – whether they’re about target date funds or anything else related to your retirement plan – Fidelity’s retirement planners are ready to help you find answers. You can schedule a one-on-one appointment at Fidelity’s office in the Purdue Memorial Union; just go to Fidelity's Purdue-dedicated website at http://netbenefits.com/purdue and click "Contact Us" and then "Meet".

 
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