Best Target Date Funds: 3 Top Picks

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The best target date funds offer a one-stop solution for low-cost retirement investing.

In this article, I’ll highlight the target date funds that Clark likes most and explain why it’s best to invest in target date funds within retirement accounts.

Table of Contents

Best Target Date Funds in 2021

Clark often describes target date funds as the “easy button” for investors. Just pick the year closest to when you think you’ll retire, put all your retirement savings into the fund and go about your life. It really can be that simple.

Target date funds figure out your portfolio allocation for you, rebalance your portfolio over time and reduce your risk profile the closer you get to retirement.

“With target date funds, you don’t have to do a thing other than invest your money,” Clark says. “It’s the ultimate in ‘set it and forget it’ investing and could be the best and easiest investment choice you ever make.”

Some of the biggest and best-known investment companies charge the fewest fees and offer the most services for this kind of investing. That’s especially true in the case of Fidelity, Schwab and Vanguard, which are Clark’s favorite brokerage firms. As you might have guessed, those firms offer his favorite target date funds, although you need to know which specific funds to buy (more on that later).

How To Evaluate Target Date Funds

You may not need to determine the best target date fund yourself. If you have a good 401(k) plan at work, just pick out the target date fund closest to when you think you’ll retire and invest in it.

However, if you’re looking to open an IRA, or you’re investing in a target date fund outside of a tax-advantaged retirement plan, here are some of the criteria to evaluate:

  • Cost. This may be the most important element of any long-term investment decision. Keeping costs low is the best way to ensure that your retirement portfolio grows into a healthy nest egg.
  • Portfolio strategy. Some fund managers are active and some are passive. Typically, active funds charge much higher annual fees (also known as “expense ratios”). More activity, however, is hardly a guarantee of a higher return. In fact, the opposite is often true.
  • Portfolio allocation. At a macro level, target date funds are alike. They purport to be singular, stand-alone portfolios that take your ideal retirement year into account. However, at a micro level, they’re all different. Some invest heavily in index funds. Others prefer individual stocks. Some rely more heavily on equities. Others shade more toward bonds.
  • Fund type. Some target date funds put you into the most conservative portfolio mix once you reach the year attached to the fund. Others extend what’s called the “glide path” years past the target date, leaving at least a little risk in your portfolio in order to outrun inflation. If you’re worried that the target date fund in which you want to invest will move toward a fixed income portfolio too quickly, you can always invest in the option that’s five years later (2060 instead of 2055, for example).

Best Target Date Funds


Expense RatiosMinimum DepositAvailable Years
0.12% to 0.75%$02005 to 2065

The Details: Fidelity’s enormity allows it to lure new customers with some fantastic deals.

Fidelity Zero funds offer 0% expense ratios. The Fidelity Rewards Visa Signature Card offers 2% cash back on all purchases with the option to invest that cash through Fidelity.

Not everything at Fidelity is priced or marketed in a consumer-friendly way, though. The company’s target date funds are a prime example.


It pushes its Fidelity Freedom Fund line first and foremost. In fact, if you automatically invest your 2% cash back from Fidelity’s credit card into its target date funds, the Fidelity Freedom Funds are the default choices.

The annual expense ratios on those funds range from 0.47% (Fidelity Freedom 2005 Fund, which is predominantly in bonds and short-term debt) to 0.75% (Fidelity Freedom 2065 Fund, which holds 92.9% of its portfolio in equities). Those are not great ratios.

The funds Clark recommends are called Fidelity Freedom Index Funds. The expense ratio for these funds is 0.12% across the board, as they’re comprised of very few assets (all of which are broad index funds).

Let’s compare two of the funds from the same year:

Fund NameExpense RatioAll-Time Performance% In Equities
Fidelity Freedom 2050 Fund0.75%7.72% annual ROI93.1%
Fidelity Freedom Index 2050 Fund0.12%10.99% annual ROI90.3%

You can examine each of the Fidelity target date funds yourself here (you’ll need to click on the “Asset Allocation” tab).

The Fidelity Freedom 2050 Fund fees are more than six times higher than the Fidelity Freedom 2050 Index Fund. But so far, despite being cheaper, the version with “index” in the name has performed significantly better.

If you invest in Fidelity’s target date funds, make sure to look for the funds with “Index” in the name.


Expense RatiosMinimum DepositAvailable Years
0.08% to 0.74%$02010 to 2065

The Details: Schwab can be opaque in its marketing.

Whereas Vanguard has a nice chart of its 130 mutual funds that’s easily sortable and displays details like expense ratios and performance, Schwab requires you do a little digging.

It does list all its target date funds on one webpage. And perhaps I’m more clueless than the average person. But I looked at this page more than a few times before I realized the full list is there if you scroll far enough.


Like Fidelity, Schwab offers two similarly-named products for every target date year. But to Schwab’s credit, it lists the table of Schwab Target Index Funds (0.08% expense ratio) ahead of the table of Schwab Target Funds (0.32% to 0.74% expense ratios).

The 0.08% expense ratio for the Schwab Target Index Funds is excellent.

Let’s do another comparison for a pair of Schwab funds with the same target date:

Fund NameExpense RatioAll-Time Performance% In Equities
Schwab Target 2050 Fund0.70%11.29%88.8%
Schwab Target 2050 Index Fund0.08%13.23%89.3%

Again, it’s important to buy into the fund with “Index” in the name.


Expense RatiosMinimum DepositAvailable Years
0.12% to 0.15%0.12% to 0.15%2015 to 2065

Thanks to founder John Bogle, Vanguard was the first investment firm to make index funds available to retail investors.

And Vanguard’s target retirement funds deserve that same reverence.

The company makes it super easy to search and compare its funds. All of Vanguard’s target date funds are named “Target Retirement.” There aren’t multiple versions. Vanguard’s target retirement funds also are comprised of its own famous index funds.

Compared to Fidelity and Schwab, Vanguard does have a couple of small downsides. First, Vanguard requires an initial minimum investment of $1,000. Second, if you’re trying to take care of several other investing needs through one company, Vanguard’s breadth of services is more limited than its two big competitors.

Vanguard’s fund portfolios are simple as well. Vanguard Target Retirement 2060 Fund holds 100% of its assets in five Vanguard index funds, including more than 90% in its total stock market and international index funds.

Who Should Invest in a Target Date Fund?

You know by now that Clark really likes target date funds. But who should invest in them? What’s the ideal fit?


Clark’s answer: “For the typical person, the target retirement fund is the right choice.” But there are some qualifiers that can make these funds especially attractive.

You may be especially suited to invest in target retirement funds if you:

  • Have a tax-advantaged retirement account such as a 401(k) or IRA
  • Want to spend as little time as possible researching investments
  • Are investing to fund your retirement, ideally a long time from now

Why Taxable Accounts and Target Date Funds May Not Mix

When you invest through a tax-advantaged retirement account such as a 401(k) or an IRA, you can buy and sell without any immediate tax consequences. That’s not the case within a taxable investment account.

Remember, target date funds shift their portfolio allocations over time, generally starting heavy in stocks and trickling toward less risky investments such as bonds. Those shifts can come swiftly as you approach your fund’s target date.

Assuming you’ve invested in the fund for a significant number of years, the fund probably is selling stocks that have appreciated in value, perhaps significantly so.

In a retirement account such as a 401(k) or IRA, that won’t create any tax consequences. But in a taxable investment account, each of those sales can trigger capital gains tax. If you’re getting toward the end of your career and making a significant income, that added tax burden can be intense.

Final Thoughts

Investing in a target date fund at Fidelity, Schwab or Vanguard is probably a great investment choice.

Depending on your circumstances, there may be a way to find a slightly more optimal investing strategy than a target date fund. But that likely requires some combination of more investing savvy and more active portfolio monitoring.

In almost every case, you aren’t going to go wrong investing for your retirement through a target date fund. It’s Clark’s most common piece of investment advice.

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