The Investment Company Institute reports that approximately $4.9 trillion was invested in target-date strategies at year-end 2025.[1] A clear indication that Target-date funds (“TDFs”) have become the dominant default investment in defined contribution plans and for good reason, TDFs solve the asset-allocation and rebalancing problem that once tripped up many participants. In TDFs a participant is defaulted or selects a TDF near their expected retirement year, and the fund handles asset allocation and rebalancing automatically. As the retirement target date approaches and often for years after retirement age the TDF generally becomes more conservative by reducing equity exposure while increasing allocations to fixed income. That changing allocation is the glide path.
That simplicity is exactly why plan fiduciaries need to look closer, not away. A TDF may be designed as a “do it for me” solution for participants, but the fiduciary responsibility for selecting and monitoring the TDF cannot be put on autopilot.[2]
A Label, Not a Strategy
The year in a TDF’s name tells you the approximate retirement horizon but it does not tell you how the fund will behave. Two 2045 TDFs can have materially different glide paths, equity exposure, asset allocations, fees, investment philosophies and downside risk. Some reach their most conservative allocation “to” retirement; others retain meaningful equity exposure well “through” it. Some rely primarily on active management, some primarily on indexing, and many blend the two. Even an all-index TDF still requires active decisions about glide-path design, asset-class weighting, rebalancing and the amount of risk participants will bear near retirement. Treating every TDF with the same vintage as if it were the same investment is the first analytical mistake by plan sponsors.
Fit Comes Before Performance
A prudent fiduciary process does not start with trailing returns, but with the people the fund is intended to serve. Participant age, the concentration of plan assets by age, savings and contribution rates, account balances by investment, salary levels, turnover, pension coverage, expected retirement age, and what participants actually do with their money at retirement all help determine how much risk a glide path should carry and for how long. Those facts should influence whether the TDF select is “to” or “through,” conservative, moderate or aggressive, index, active or hybrid, proprietary/single-provider or multi-manager/open architecture, and whether retirement-income features add value. The fiduciary should then document why that design reasonably fits the workforce rather than selecting the fund with the best trailing return at a particular point in time. Finally, the underlying investment strategies should be evaluated to determine whether the managers entrusted with implementing the glide path have produced consistently good, occasionally great, results relative to appropriate benchmarks and comparable peers. An otherwise sensible glide path can still disappoint if too much of the portfolio is allocated to persistently weak underlying managers.
Measuring the Right Thing
Comparing TDFs solely because they share a vintage year invites an apples-to-oranges result. A defensible evaluation should use more than one lens. A comparison of the selected TDF with competitors that have reasonably similar objectives, glide paths and risk characteristics along with an evaluation of the selected TDF versus its appropriate target-date index; and a comparison to a custom index made up of the appropriate index for each underlying holding in the same allocation percentage permits a 3-point assessment. That custom benchmark helps separate the return produced by the glide path and asset allocation from the value added—or lost—through manager selection. The importance of meaningful comparisons was reinforced in Pizarro v. Home Depot[3]. The Eleventh Circuit rejected comparisons between BlackRock TDFs and more aggressive TDFs as “apples and oranges.” Home Depot’s consultant used a custom index that adjusted the comparison universe to reflect BlackRock’s glide-path allocation, and the challenged TDFs closely tracked those risk-adjusted comparisons. The lesson is not that one benchmark methodology is legally required. It is that performance means very little unless the comparison reflects the risk and investment strategy actually being evaluated.
Affiliation Isn’t Automatically a Conflict or a Free Pass
Many recordkeepers offer a proprietary TDF managed by the recordkeeper or an affiliated investment manager. Sometimes that proprietary TDF is the platform’s only standard TDF option; in other cases, an outside TDF may be available only with additional fees or operational conditions. That does not end the fiduciary analysis. It creates two related questions. Is the TDF itself prudent for the participant population, and is the recordkeeping arrangement that makes the proprietary TDF available still prudent for the plan? Affiliation should neither automatically disqualify the TDF nor excuse it from independent scrutiny. [4] The proprietary TDF should first satisfy the same participant-fit, risk, performance, underlying-investment and fee standards applied to appropriate unaffiliated alternatives. If it does, any recordkeeping rebate, fee credit or pricing advantage that is actually credited to participants or used to reduce reasonable plan expenses is part of the economic analysis. The relevant comparison is therefore not simply TDF expense versus TDF expense; it is investment quality plus total participant economics. Department of Labor guidance also encourages fiduciaries to ask whether nonproprietary or custom alternatives would be a better fit, so the file should show that alternatives were considered even when the recordkeeper’s proprietary solution ultimately offers the strongest combination of fit, investment quality and participant value.
Monitor the Process, Not Just the Scorecard
A costly mistake is reducing monitoring to a quarterly point-in-time return number. The past three- or five-year returns can reflect an explainable market cycle, or it can signal a genuine breakdown tied to style drift, a manager operating outside its mandate, rising tracking error, personnel departures, or it can hide a year of underperformance. A five-year return ending today tells the fiduciary only what happened between the beginning and end point. Rolling one-, three- and five-year periods reveal how consistently the strategy performed throughout the evaluation period and make it harder for one strong recent year to mask one or several years of poor results. Keep in mind that underperformance alone does not demand replacement. The fiduciary should determine whether the lag reflects the expected behavior of the strategy or evidence that the original investment thesis is breaking down. A prudent monitoring process therefore a defined point when “watch” becomes “replace,” not just another meeting where the issue gets pushed to the next committee meeting.
The Takeaway
A prudent TDF decision is not about finding the fund that won yesterday it is about demonstrating why the TDF is appropriate for the people who are investment their retirement savings in it. That means understanding the participant population, defining the risk and glide-path characteristics that fit that population, evaluating the quality of the underlying investments, comparing the TDF against benchmarks and competitors that are similar, considering total participant economics, documenting the reasoning, and monitoring the factors that drive results with clear triggers for escalating concern. In short, the fiduciary decision to select and monitor the TDF cannot be put on autopilot.
[1] Investment Company Institute, Target Retirement Date Funds (year-end 2025 asset data)
[2] U.S. Department of Labor, Target Date Retirement Funds—Tips for ERISA Plan Fiduciaries
[3] Pizarro v. The Home Depot, Inc., No. 22-13643 (11th Cir. Aug. 2, 2024)
[4] U.S. Department of Labor Advisory Opinion 2003-09A.
