We don't live in a one-size-fits-all world anymore. Even investments now come tailored for many different kinds of people. The folks at Vanguard have joined those taking this to a bit of an extreme, with a new target-date mutual fund designed for those planning to retire in 2055. It's great in theory, but it's not such a big deal. Watch out for target-date funds: Many will undermine your growth.

To back up a bit, target-date funds, which have been growing rapidly in popularity, are designed to do all your investment reallocation for you over time as you approach retirement. Each one will decrease your stock exposure as you approach your target retirement date, usually as it ups your bond exposure.

A little out of the box
A nice thing about the funds is that you don't have to invest in the one for your retirement age. You can be more conservative or aggressive by choosing a fund with an earlier or later year. There are limits, though. Five-year-olds today won't find any funds with a 2070 target date. But there are 2055 funds now. Their target investor is probably someone born around 1990, who's around 20 years old today, and plans to retire around age 65. (Of course, by that time most people might be retiring at 70 -- if they don't plan well.)

That's the theory. But reality lets us down. You would think that opting for a 2055 fund instead of a 2035 one (if 2035 is closest to your retirement year) would give you much more exposure to stocks, and a way to be more aggressive with your investments while still being lazy, letting a fund company watch and move your money. But both the Vanguard 2035 and Vanguard 2055 funds have about 90% of their money in stocks and 10% in bonds. Put another way, there's almost no variation between those 2035 and 2055 funds, even though their target dates are a full two decades apart. T. Rowe Price (Nasdaq: TROW), another fund company capitalizing on the move to target-date funds, has similar allocations.

Make your moves
As promising as target-date funds are, they're not a silver bullet. For many of us, they invest more conservatively than we'd like. The Vanguard 2035 fund, for example, has 80% of its assets in North America, and only 4% in emerging markets, which offer great growth potential.

Poorly chosen target-date funds can thwart your nest-egg-growing ambitions via suboptimal allocations -- and also through steep fees that can eat at your returns. If you're thinking of buying into one, look closely at its fees, because some fund companies seem to be getting richer than others on fees.

Who's making money
Check out this range for some 2025 funds:

2025 Target-Date Fund From

Annual Expense Ratio

Maximum Sales Load

Vanguard 0.18% None
T. Rowe Price 0.74% None
Schwab (NYSE: SCHW) 0.84% None
Wells Fargo (NYSE: WFC) 0.95% None
ING (NYSE: ING) 1.09% None
AllianceBernstein (NYSE: AB) 1.01% 4.25%
Legg Mason (NYSE: LM) 0.99% 5.75%
Oppenheimer (NYSE: OPY) 1.49% 5.75%


Data: Morningstar.

Target-date funds can serve you well, but you need to choose yours carefully. Beware of high fees and know that there are very inexpensive alternatives out there, such as Vanguard's funds. Look at the underlying investments in each contender, too, and how it's allocating your money. If you have several decades before you retire, you're probably best off with much of your money in stocks.

Look at the big picture, too. If you're happy with your $100,000 invested in a target-date fund that splits your money 50-50 between stocks and bonds, but you have another $100,000 invested in stocks separately, your overall allocation is really 75% stocks and 25% bonds. Many 401(k)s these days will automatically park your contributions into what seems like the right target-date fund for you. Take a closer look at it, though, and if you don't like what you see, change it. You might be 45 years old, for example, but prefer some other fund to the 2030 one.

More than ever, our retirements are left to us. We can build a comfortable one if we have a smart plan and stick to it.

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Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Charles Schwab is a Motley Fool Stock Advisor choice. The Fool owns shares of Legg Mason and T. Rowe Price Group. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.