By Kenneth Ling, CFA, MMBB’s Director of Investments
What's in This Article?
- How TDFs Work
- Benefits of a TDF
- Next Steps if You’re Interested in TDFs
Saving for retirement is important, but choosing the right investment strategy can be challenging. Target Date Funds (TDFs) are designed to simplify that decision by offering a professionally managed portfolio aligned with your expected retirement year. MMBB's TDFs, known as Target Retirement Funds, combine multiple Vanguard Index Funds that invest in a diversified mix of stocks and bonds. As you move closer to retirement, the fund's investment mix automatically adjusts to balance growth opportunities with risk management.
How TDFs Work
A target date fund is designed to provide a diversified retirement portfolio in a single fund. Participants typically select the fund with the retirement year closest to their retirement date, and the portfolio's asset allocation rebalances automatically over time.
In the earlier years, the fund generally holds a larger allocation of stocks to pursue long-term growth. As retirement approaches, the allocation gradually shifts toward a greater mix of bonds and other fixed income investments, which historically have experienced lower volatility than stocks.
Note that the target date is not the point at which the fund stops changing. Participants do not need to withdraw their assets once the fund reaches its target year. Instead, the fund continues to adjust its asset allocation throughout retirement, gradually balancing the need for growth with the goal of managing risk. According to Vanguard, its target date funds have historically delivered competitive long-term returns with less volatility than peer averages.1
Each of MMBB's 12 Target Retirement Funds invests in U.S. and international stocks, U.S. and international bonds, and short-term Treasury Inflation-Protected Securities* in varying proportions. This diversification helps reduce the burden of building and monitoring a portfolio on your own.1Many retirement plans, including MMBB's, automatically enroll participants in a target date fund if they do not make an investment election.
Benefits of a TDF
For many participants, the primary benefit of a TDF is its simplicity. Kenneth Ling, Director of Investments at MMBB, explains. “One of the biggest advantages of a target date fund is how straightforward it can make retirement investing. MMBB members who use Target Retirement Funds receive a professionally managed, diversified portfolio that adjusts over time, so those members don’t have to continually manage their investment allocation. That means less time worrying about investment decisions and more time focusing on what matters most, including their ministry.”
Next Steps
Selecting a Target Retirement Fund does not lock you into a permanent decision. You may change your investment elections, select a different target retirement year, or move assets to other investment options at any time.
To learn more about MMBB's Target Retirement Funds, visit MMBB's Target Date Fund webpage. If you’re an MMBB member, contact an MMBB Financial Planning Specialist at [email protected] or 1-800-986-6222.
Remember, financial planning services are available to MMBB members at no additional cost as part of membership. Members interested in investing in a Target Retirement Fund can update their investment elections through the MMBB Member Portal.
