Are Target Date Funds Right for You?

Jul 16, 2025

 

🕒 Reading time: 5 minutes

Hi Wealth Builders! I'm Ben — Head Coach with Steve at Call to Leap.

Feeling overwhelmed by retirement planning? You're not alone! Many investors struggle to choose the right strategy to secure their financial future.

Two popular options are target date funds and DIY (do-it-yourself) investing. In this post, we’ll compare both strategies so you can confidently decide which one fits your retirement goals and investing style.


🎯 What Are Target Date Funds? A Hands-Off Approach to Retirement

Target date funds simplify retirement investing by automatically adjusting asset allocation (aka "your risk") based on your expected retirement year (e.g., 2050, 2060).

How They Work:
They follow a “glide path,” shifting from mainly growth-focused assets (like stocks) to more conservative ones (like bonds) as you near retirement.

Benefits:

  • Hands-off management

  • Automatic diversification

  • Great for beginner investors

⚠️ Drawbacks:

  • May underperform common index funds over the long term (e.g. SPLG, QQQM)
  • Less control over fund decisions

  • Can have higher expense ratios than low-cost index funds


🛠️ DIY Investing: Total Control, Greater Responsibility

DIY investing puts you in charge of building and managing your retirement portfolio using low-cost index funds and ETFs.

How It Works:
You choose your investments, set your asset allocation, and rebalance when YOU want.

Benefits:

  • Full control over allocation

  • Potentially lower fees with index funds

  • Customization to your risk tolerance, today and down the road

  • Potentially high returns compared to Target Date Funds (do your research!)

⚠️ Drawbacks:

  • More time and effort required, especially as retirement approaches

  • Potential for emotional or uninformed decisions


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💸 Expense Ratios: The Silent Killer of Retirement Growth

Expense ratios are the annual fees charged by mutual funds and ETFs—and they matter a lot.

Key Points:

  • Even a 0.5% difference in fees can cost tens or hundreds of thousands over time.

  • Target date funds often have higher fees than index funds.

  • Look for ratios under 0.5%—ideally under 0.25%—for core holdings.

Don’t let high fees eat your returns. Every percent counts when compounding over decades.


🤔 Consider a Blended Approach

Maybe Target Date Funds aren't your favorite choice today, especially if you're decades away from retirement.

As you approach retirement, Target Date Funds might make sense, since they automatically adjust when you may need to be more conservative. 

You may choose to reallocate your index funds into a Target Date Fund closer to retirement, especially in a tax-advantaged retirement account (think: Roth IRA, 401k).

 


Final Word:
Target date funds offer simplicity and automation. DIY investing offers control and lower fees. There's no single "best" approach—just the one that aligns with your goals, risk tolerance, and time commitment. Whatever you choose, the key is to get started and stay consistent.

— Ben, for the Call to Leap Team


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Disclaimer:
The following article is strictly the opinion of the author and is not to be considered financial/investment advice. CTL Community LLC and the author of this article do not claim to be a registered financial advisor (RIA) or financial advisor. Please visit our terms of service and privacy policy before reading this article. Call to Leap may earn affiliate commissions from the links mentioned. Call to Leap is part of an affiliate network and receives compensation for sending traffic to partner sites such as ImpactRadius, CardRatings, MyBankTracker, and more.

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