AMERICAN FUNDS TARGET DATE RETIREMENT SERIES®
Retirement is changing.
So is the way we plan for it.
Focus on returns over the long haul
Solid short-term results might look good on paper, but they may not be sustainable. At the same time, some investors think an index return is good enough. But there's a better way: Small, but steady increases in results can add years of spending in retirement.
Years of retirement spending
(Hypothetical investment scenario)
Demographic assumptions: Starting balance is $0, starting age is 25, starting salary is $40,000, annual salary growth rate is 3%, annual contribution rate is 10% and retirement age is 65 with an ending salary of $130,482.
Source: Capital Group. The demographic assumptions, returns and ending balances are hypothetical and provided for illustrative purposes only, and are not intended to provide any assurance or promise of actual returns and outcomes. Based on an exhibit from Russell Investments. Retirement income assumes 48% income replacement rate. Please see additional exhibit methodology and assumptions below.
Our target date series has delivered over the long run
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Long term
For participants with a long-term investment horizon, these are the results that matter most. Our Series has strongly outpaced peers over longer periods.
Morningstar category percentile return rankings
(With absolute rank and number of funds in category indicated.)
Source: Capital Group, using Morningstar data. Results as of December 31, 2020. Percentile rankings calculated by Morningstar and reflect relative performance versus peers. A lower number is better, with 1st percentile indicating the fund’s performance was in the top 1% of its peer group. Our approach to allocating between stocks and bonds puts more emphasis on stocks than some other target date funds. This helps manage the risk of investors outliving their savings. We also place a greater emphasis on dividend-paying stocks to provide more equity exposure while managing volatility.
All funds began on February 1, 2007, except for the 2055 fund, which began on February 1, 2010, and the 2060 fund, which began on March 27, 2015. Rankings are based on the funds’ average annual total returns (Class R-6 shares at net asset value) within the applicable Morningstar categories. The rankings do not reflect the effects of sales charges, account fees or taxes. Past results are not predictive of results in future periods. The Morningstar category average includes all share classes for the funds in the category. While American Funds R-6 shares do not include fees for advisor compensation and service provider payments, the share classes represented in the Morningstar category have varying fee structures and can include these and other fees and charges resulting in higher expenses and lower returns.
For a list of each fund's Morningstar category, please see the "Morningstar categories" section. The category includes active, passive and hybrid target date funds, as well as those that are managed both "to" and "through“ retirement. Approximately one-third of the funds within the 2000-2010 category have a target date of 2005. In an effort to manage the risk of investors outliving their savings while managing volatility, our approach to allocating between stocks and bonds puts more emphasis on stocks (particularly on dividend-paying stocks) than some other target date funds.
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. When applicable, investment results reflect expense reimbursements, without which results would have been lower.
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Short term
Over shorter periods, results can fluctuate in response to recent market movements. Overall, most of our funds’ short-term ranks remain strong relative to peers.
Morningstar category percentile return rankings
(With absolute rank and number of funds in category indicated.)
Source: Capital Group, using Morningstar data. Results as of December 31, 2020. Percentile rankings calculated by Morningstar and reflect relative performance versus peers. A lower number is better, with 1st percentile indicating the fund’s performance was in the top 1% of its peer group. Our approach to allocating between stocks and bonds puts more emphasis on stocks than some other target date funds. This helps manage the risk of investors outliving their savings. We also place a greater emphasis on dividend-paying stocks to provide more equity exposure while managing volatility.
All funds began on February 1, 2007, except for the 2055 fund, which began on February 1, 2010, and the 2060 fund, which began on March 27, 2015. Rankings are based on the funds’ average annual total returns (Class R-6 shares at net asset value) within the applicable Morningstar categories. The rankings do not reflect the effects of sales charges, account fees or taxes. Past results are not predictive of results in future periods. The Morningstar category average includes all share classes for the funds in the category. While American Funds R-6 shares do not include fees for advisor compensation and service provider payments, the share classes represented in the Morningstar category have varying fee structures and can include these and other fees and charges resulting in higher expenses and lower returns.
For a list of each fund's Morningstar category, please see the "Morningstar categories" section. The category includes active, passive and hybrid target date funds, as well as those that are managed both "to" and "through“ retirement. Approximately one-third of the funds within the 2000-2010 category have a target date of 2005. In an effort to manage the risk of investors outliving their savings while managing volatility, our approach to allocating between stocks and bonds puts more emphasis on stocks (particularly on dividend-paying stocks) than some other target date funds.
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. When applicable, investment results reflect expense reimbursements, without which results would have been lower.
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American Funds Target Date Series vintages have delivered superior outcomes compared to large passive peers with additional returns that, on average, have exceeded the additional cost. The charts below illustrate the range of higher returns and additional expenses by vintage.
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The benefit
Our Series has delivered 1.11% in additional annual return on average across its vintages vs. its largest passive peers.
Range of AFTD’s annualized excess returns vs. largest passive peers (after fees since earliest common inception)
Source: Capital Group, using data obtained from Morningstar. As of December 31, 2020. Data for American Funds is Class R-6 shares and of the lowest cost share class with sufficient track record for each peer target date series.
Exhibit methodology
Each vintage within the American Funds Target Date Retirement Series was compared to existing peer vintages in the same Morningstar category since earliest common inception of the two vintages (common inception dates ranged from February 1, 2007 to August 25, 2016). Excess return represents annualized lifetime net excess return since earliest common inception; results in other periods differ. Analysis includes the eight largest passive series based on mutual fund AUM as of December 31, 2020 and ranged from $2.3 billion to $588.9 billion. Passive series defined as those with less than 20% of assets in active strategies. Fee difference based on expense ratios as of December 31, 2020.
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The cost
Yet, our Series on average costs just 0.25% more per year than its largest passive peers.
Range of AFTD’s additional annual expense vs. largest passive peers
Source: Capital Group, using data obtained from Morningstar. As of December 31, 2020. Data for American Funds is Class R-6 shares and of the lowest cost share class with sufficient track record for each peer target date series.
Exhibit methodology
Each vintage within the American Funds Target Date Retirement Series was compared to existing peer vintages in the same Morningstar category since earliest common inception of the two vintages (common inception dates ranged from February 1, 2007 to August 25, 2016). Excess return represents annualized lifetime net excess return since earliest common inception; results in other periods differ. Analysis includes the eight largest passive series based on mutual fund AUM as of December 31, 2020 and ranged from $2.3 billion to $588.9 billion. Passive series defined as those with less than 20% of assets in active strategies. Fee difference based on expense ratios as of December 31, 2020.
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Build and preserve wealth
Our Series adapts to changing participant needs by adjusting both its stock/bond mix and the types of assets held through each stage of life.
30 years before retirement
HIGHER TOLERANCE FOR RISK
For early career participants, the Series' equity funds pursue growth while its conservative fixed income and balanced funds seek to dampen downside risk. The emphasis is on long-term capital appreciation.
ALLOCATION TO INVESTMENT OBJECTIVES (%)
EQUITY
Growth
Growth and income
MULTI-ASSET
Equity income
Balanced
FIXED INCOME
Diversification from equity
Inflation protection
Income
Capital preservation
At retirement
MODERATE TOLERANCE FOR RISK
For participants in or near retirement, the Series‘ equity funds seek both growth and income while the fixed income exposure broadens in pursuit of multiple goals. These goals include lowering portfolio volatility, protecting purchasing power, providing dependable income and protecting principal.
ALLOCATION TO INVESTMENT OBJECTIVES (%)
EQUITY
Growth
Growth and income
MULTI-ASSET
Equity income
Balanced
FIXED INCOME
Diversification from equity
Inflation protection
Income
Capital preservation
30 years after retirement
LOWER TOLERANCE FOR RISK
For investors well into their retirement, the Series‘ multi-asset funds provide equity income and the opportunity for growth as the larger fixed income allocation seeks to preserve wealth. The emphasis on more conservative equity types allows the Series to maintain a meaningful equity allocation later in life.
ALLOCATION TO INVESTMENT OBJECTIVES (%)
EQUITY
Growth
Growth and income
MULTI-ASSET
Equity income
Balanced
FIXED INCOME
Diversification from equity
Inflation protection
Income
Capital preservation
Compare target date series
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Our core beliefs
Our distinctive, long-term investment approach is designed to help participants retire on their terms.
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Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only.
American Funds Distributors, Inc., member FINRA.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
©2021 Morningstar, Inc. All Rights Reserved. Except for Lipper rating information, the information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar, its content providers nor Capital Group are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Information is calculated by Morningstar. Due to differing calculation methods, the figures shown here may differ from those calculated by Capital Group.
Although the target date portfolios are managed for investors on a projected retirement date time frame, the allocation strategy does not guarantee that investors' retirement goals will be met. Investment professionals manage the portfolio, moving it from a more growth-oriented strategy to a more income-oriented focus as the target date gets closer. The target date is the year that corresponds roughly to the year in which an investor is assumed to retire and begin taking withdrawals. Investment professionals continue to manage each portfolio for approximately 30 years after it reaches its target date.
The target allocations shown are as of January 1, 2021, and are subject to the oversight committee's discretion. The investment adviser anticipates assets will be invested within a range that deviates no more than 10% above or below these allocations. Underlying funds may be added or removed during the year. Changes in the equity allocation within the underlying equity-income and balanced funds may affect the overall equity exposure in the target date portfolios.
Important investment disclosures
Figures shown are past results for Class R–6 shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. View fund expense ratios and returns. Returns shown at net asset value (NAV) have all distributions reinvested. For current information and month–end results, visit americanfundsretirement.com.
Class R-6 shares were first offered on May 1, 2009. Class R-6 share results prior to the date of first sale are hypothetical based on the results of the original share class of the fund without a sales charge, adjusted for typical estimated expenses. Please see each fund's prospectus for more information on specific expenses. We offer a range of share classes designed to meet the needs of retirement plan sponsors and participants. The different share classes incorporate varying levels of advisor compensation and service provider payments. Because Class R-6 shares do not include any recordkeeping payments, expenses are lower and results are higher. Other share classes that include recordkeeping costs have higher expenses and lower results than Class R-6. Investment allocations for funds of funds may not achieve fund objectives. There are expenses associated with the underlying funds in addition to fund-of-funds expenses. The funds’ risks are directly related to the risks of the underlying funds, as described herein.
Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks. The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Investments in mortgage-related securities involve additional risks, such as prepayment risk, as more fully described in the prospectus. Higher yielding, higher risk bonds can fluctuate in price more than investment-grade bonds, so investors should maintain a long-term perspective. While not directly correlated to changes in interest rates, the values of inflation-linked bonds generally fluctuate in response to changes in real interest rates and may experience greater losses than other debt securities with similar durations. Fund shares of U.S. Government Securities Fund are not guaranteed by the U.S. government. Investment results assume all distributions are reinvested and reflect applicable fees and expenses.
When applicable, investment results reflect expense reimbursements, without which results would have been lower. Please see capitalgroup.com for more information.
Extra years of retirement spending chart
Returns will be affected by the management of the investments and any adjustments to the assumed contribution rates, salary or other participant demographic information. The additional years of retirement spending are intended to represent a conservative measure. Actual results may be higher or lower than those shown. Past results are not predictive of results in future periods.
Morningstar categories
American Funds Target Date 2010 |
Morningstar Target Date 2000–2010 |
American Funds Target Date 2015 |
Morningstar Target Date 2015 |
American Funds Target Date 2020 |
Morningstar Target Date 2020 |
American Funds Target Date 2025 |
Morningstar Target Date 2025 |
American Funds Target Date 2030 |
Morningstar Target Date 2030 |
American Funds Target Date 2035 |
Morningstar Target Date 2035 |
American Funds Target Date 2040 |
Morningstar Target Date 2040 |
American Funds Target Date 2045 |
Morningstar Target Date 2045 |
American Funds Target Date 2050 |
Morningstar Target Date 2050 |
American Funds Target Date 2055 |
Morningstar Target Date 2055 |
American Funds Target Date 2060 |
Morningstar Target Date 2060+ |