Not at all. Most target date funds do follow a similar strategy: You pick the fund closest to your retirement date, invest your money, and the fund manager adjusts the mix of stocks, bonds and cash to become more conservative over time. But these funds can differ dramatically—from the investments in each fund, to the fees, to what happens on that target date. Some funds stop becoming more conservative on the target date, for example. But Schwab Target Funds continue to adjust your mix of investments for years into retirement, offering the potential for growth into your retirement years.

Not true. The “target date” refers to the year you plan to retire—and when you’ll stop making contributions and can start taking withdrawals. That year also determines the mix of investments in the fund over time: The percentage of stocks in the portfolio decreases as you approach retirement, so you’re exposed to less risk. For example, a Schwab Target Fund may be 72% stocks when you’re 50, and it will continue to become more conservative, with approximately 40% in stocks by the target date. Schwab Target Funds, whose asset allocation formulas—or glide paths—go well past the target date (see above), are designed to offer the potential for ongoing growth. This helps to lessen the chance that you’ll outlive your money, while still seeking to reduce risk over time.

Not usually. The SEC requires funds to clearly state their fees. For instance, the expense ratio you see for the Schwab Target Funds on the website or in the fund prospectus is the entire fee you pay for the management and operation of the fund. That said, most target date funds are built as “funds of funds,” meaning they are composed of many different funds of varying asset classes. There are indirect costs associated with these underlying funds, but they are included in the total expense ratio of the target date fund. In the end, it’s always a good idea to look closely at a fund’s fact sheet or other documents to fully understand what you are paying.

Actually, you may want to consider investing in target date funds outside your 401(k) as well. If you like the idea of an all-in-one portfolio that does the rebalancing for you, target date funds are available in many retirement savings accounts, such as an IRA, a rollover IRA or a brokerage account. Also, unlike the target date fund in your 401(k) plan, an account outside your company may allow you to choose from a wide range of target date fund providers.

Not exactly. While target date funds are designed to be long-term investments, you can usually sell these funds by placing an order to redeem shares. That said, the type of account your fund is in determines how accessible the cash is. If your target date fund lies within a tax-deferred retirement account such as a 401(k) or an IRA, early withdrawals before age 59½ could trigger penalties, depending on the circumstances of the withdrawal and company policy. (Exchanging shares for other mutual funds in the retirement account, however, will not incur penalties.) But if your target date fund is in a brokerage account, you can access the money with ease.

In reality, target date funds are subject to market fluctuations and losses just like any products that invest in the stock market—even at or after the target date. That said, target date funds are typically well diversified, and their mix of asset classes can provide balance over the long term, helping to offset extreme ups and downs during times of volatility. Although market changes can introduce risk, being in the market both gives you the potential for growth and helps keep you ahead of inflation.

Important Disclosures
Investors should carefully consider information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can view, download, and print a prospectus by clicking Investor Information, or call 800-435-4000 to request a prospectus. Please read the prospectus carefully before investing.

Investment value and return will fluctuate, such that shares, when redeemed, may be worth more or less than their original cost.

The Funds are subject to market volatility and risks associated with the underlying investments. Risks include exposure to international and emerging markets, small company and sector equity securities, and fixed income securities subject to changes in inflation, market valuations, liquidity, prepayments, and early redemption.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

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