When it comes to saving for retirement, the sooner you get started, the more likely you are to achieve your goals. But with so many investment options available, how do you decide where to put your money? One approach is through target date funds, also known as life cycle funds, which seek to simplify investment decision-making by automatically adjusting a portfolio as retirement approaches.
28 August 2026
What are target date funds?
Think of a target date fund as a collection of investment funds that combines different investment objectives and that is specifically designed with your retirement date in mind. The target date is the year you plan to retire and begin taking withdrawals. For example, if you plan to retire around 2055, you might select a target date fund with 2055 in its name. Choosing a fund with a target year close to your expected retirement date allows the investment portfolio to be managed according to that time horizon.
Key benefits of target date funds
Built-in diversification
A key benefit that target date funds offer is built-in portfolio diversification. A target date portfolio typically emphasises equities during the early stages of an investor's journey, when there is more time to pursue long-term growth. As you get closer to retirement, the portfolio gradually becomes more conservative, with less money invested in shares and more in lower-risk assets such as bonds. The goal shifts from growing your savings as much as possible to protecting the wealth you've built over time.
Automatic age-based rebalancing through a ‘glide path’
This gradual transition from stocks to bonds over time is called the glide path. The glide path shows how your investment mix will automatically shift over the years.
With that, a target date portfolio is automatically rebalanced to maintain its target allocations. This means the portfolio is systematically adjusted over time to remain consistent with its intended investment approach.
Retirement investing changes as you age, but the process of rebalancing a portfolio is often a stressful or emotional one. There are many questions an investor may ask, such as:
- Which equity or fixed income fund should I choose?
- How should I allocate my money between stocks and bonds?
- When should I reduce investment risk?
- How often should I rebalance my portfolio?
- What should happen to my investments as retirement approaches?
Emotions can cause investors to buy or sell at inopportune times. By following a predetermined glide path and rebalancing process, target date funds take the emotion and guesswork out of the process. This can help investors remain focused on their long-term retirement goals and stay invested, giving their investments more time to benefit from the power of compounding.
Do target date funds continue after retirement?
A common misconception is that a target date fund automatically closes, cashes out or stops investing when the target retirement year arrives. Most target date funds continue managing your investments beyond the target date, although how they do so depends on the fund's design.
There are two broad approaches to target date investing. Some funds are designed to get investors to retirement, while others are designed to take investors through retirement.
- "To" funds gradually become more conservative as the target retirement year approaches and typically reach their final asset mix at retirement. These funds are often designed for investors who expect to move their savings into an income fund when they stop working.
- "Through" funds are designed to stay with you in retirement. Rather than stopping at the target year, they continue adjusting their investments over time, with an increasing focus on generating income while managing risk. Investors can remain invested while making withdrawals to help meet their retirement income needs.
How to choose a target date fund?
Not all target date funds are created equal. Funds with the same target retirement year can vary meaningfully in their approach, risk profile, and investor experience. Consider the following before making a choice:
1. How does its glide path work?
Glide paths can vary significantly. When evaluating a target date fund, investors should understand how the fund's asset allocation evolves over time. For example, some strategies take a more gradual approach to reducing risk, while others shift more aggressively towards defensive assets as retirement approaches.
2. What investments does the fund hold?
Some target date strategies continue to evolve before, during and after retirement, adjusting not only the overall mix of equities and fixed income, but also the types of investments held within those asset classes.
For example, a strategy may gradually move from growth-oriented equities towards more resilient, income-oriented equities as retirement approaches, while simultaneously adjusting its fixed income allocation to place greater emphasis on diversification, capital preservation or income generation.
3. What are the fees?
Fees reduce investment returns over time. Review the fund’s expense ratio and any other applicable charges, rather than selecting a fund based only on its target year.
4. Does the fund continue to be managed during retirement?
Check whether the glide path ends at the target date or continues through retirement. This may affect the portfolio’s level of growth potential and investment risk after you retire.
CPF New Investment Scheme
Recognising that a large number of investment choices can make retirement investing difficult to navigate, the CPF Board announced plans to launch a new investment scheme in 2028.