S&P Target Date To 2035 Index (2024)

FAQs

Are target-date index funds worth it? ›

Target-date funds benefit investors who do not follow investment markets, learn how to invest, and take a hands-on approach to their retirement. They're even a smart move for people inclined to frequently change their fund allocation inside their 401(k).

A target-date fund is generally a "fund of funds," meaning that the investor is paying an extra layer of fees. Those additional fees could make the fund's actual return compare unfavorably to other options for a retirement portfolio, such as an S&P 500 Index Fund. Securities & Exchange Commission.

For one thing, the composition of target-date funds and the reallocations that occur over time suggest the only thing determining an investor's risk profile is how old they are. Many other factors go into that, including their assets and liabilities. The other issue here is diversification.

Returns in the S&P 500 over the coming decade are more likely to be in the 3%-6% range, as multiples and margins are unlikely to expand, leaving sales growth, buybacks, and dividends as the main drivers of appreciation.

Index funds typically offer lower costs, broad market exposure, and simplicity, while target-date funds are a hands-off, all-in-one investment vehicle. Factors to consider when choosing between target-date and index funds include your investment goals, risk tolerance, and time horizon.

Instead of keeping all of your cash in a target-date fund, Albertynas recommends spreading your money around. “On considering alternatives, 401(k) plan holders can look into index funds, which track segments of the market, or individual stocks.

Investing in a broad market index fund can take a lot of the guesswork away. If you're not a confident investor, an S&P 500 index fund could be your best choice. If you're willing to do the work and research stocks individually, you might enjoy stronger gains in your retirement account.

Key Takeaways. Index funds offer more choices and lower costs, while a target-date fund is an easy way to invest for retirement without worrying about asset allocations. Index funds include passively-managed exchange-traded funds (ETFs) and mutual funds that track specific indexes.

Most target-date funds are established in 5-year intervals (e.g., maturing in 2030, 2035, 2040, 2045, and so on). There is no set rule if you plan to retire in say, 2033.

Key Takeaways. Target-date funds provide a simple way to save for retirement. They offer exposure to a variety of markets, active and passive management, and a selection of asset allocation. Despite their simplicity, investors who use target-date funds need to stay on top of asset allocation, fees, and investment risk.

Can you sell target-date funds at any time? ›

If I retire, can I withdraw my savings from my target date fund even if it has not reached its designated year? Yes, you can withdraw your money at any time. However, if you retire early (before age 59 1/2), you may be subject to a tax penalty for early withdrawal. Who manages the target date funds?

A target-date fund is a mutual fund (or exchange-traded fund) that gradually rebalances and reallocates assets as you get closer to retirement, typically shifting the majority of assets from riskier investments such as stocks to more conservative investments such as bonds and cash.

Over the past decade, you would have done even better, as the S&P 500 posted an average annual return of a whopping 12.68%. Here's how much your account balance would be now if you were invested over the past 10 years: $1,000 would grow to $3,300.

The S&P 500 is headed for 15,000 by the end of the decade, says Tom Lee, who foresaw the 2023 rally.

If you take your $100,000 and put it in an S&P 500 index fund, you could end up with over $1 million within 24 years if the index produces returns in line with its historical average. If you keep saving, you can get there even faster.

Early in the fund's timeline, assets are geared toward higher-risk, higher-reward assets such as stocks. As the fund gets closer to its target year, risk is dialed back with a more conservative portfolio of fixed-income investments.

We find that the value of long-dated TDFs (those with a target date of 2045 and beyond) fell by between 30 and 35 percent, whereas the 2025 funds, designed for people roughly 60 years old, lost between 20 and 25 percent of their value. We find that past performance only weakly influences future expected performance.

To invest in a target-date fund, investors typically choose the fund with the name closest to the date they plan to retire. An investor who is age 30 and wishes to retire at age 65 might choose a target-date fund with a date close to 35 years in the future.