Millions of Americans saving for retirement through 401(k) plans hold target-date funds that automatically adjust their mix of stocks, bonds, and cash over time. The design is straightforward: start with higher-risk equities when retirement is decades away, then gradually shift toward lower-risk fixed income as the target year approaches. But a gap in federal oversight, flagged by the Government Accountability Office, has left open questions about whether the guidance governing these funds still matches how they actually work, and whether savers understand the real risk they carry at or beyond their target date.
Why the stock-to-bond shift matters for 401(k) savers right now
Target-date funds are built around a concept called a glide path, the schedule by which a fund’s asset allocation moves from growth-oriented stocks toward more conservative bonds and cash. The SEC’s bulletin explains that advisers typically design these funds to be more stock-heavy early on and more bond-weighted as the target date nears. That automatic rebalancing is the core selling point: savers do not need to manually adjust their portfolios as they age.
The tension sits in what happens around and after the target year. Not all target-date funds treat the target date the same way. Some follow a “to” glide path, reaching their most conservative allocation by the target date and holding steady. Others use a “through” glide path, continuing to shift allocations for years after the target date has passed. A “through” fund with a 2025 target date, for example, could still hold a meaningful share of equities well into the 2030s. That distinction directly affects how much market risk remains in a retiree’s account during the years when they are drawing down savings and have less time to recover from losses.
The hypothesis that “through” funds show measurably higher volatility in the five years after their target date than “to” funds is testable using prospectus holdings data and return series. Because “through” funds maintain larger equity positions past the target year, they are structurally exposed to wider price swings. Savers who assume their fund becomes fully conservative at the target date may be surprised by losses during a downturn, a scenario that played out for some target-date fund holders during the 2008 financial crisis and prompted federal regulators to act.
Federal regulators flagged glide-path risks but guidance has not kept pace
On May 6, 2010, the Department of Labor and the SEC jointly responded to concerns about how these products operate and how plan fiduciaries should evaluate them. At the time, the SEC emphasized that most target-date funds are designed so their mix of stocks, bonds, and cash automatically changes to become more conservative as the target date approaches. The agencies also focused on clearer disclosure, including graphics depicting the glide path so investors could see how risk changes over time instead of relying on the fund’s name alone.
The SEC later proposed amendments that would require target-date funds using a year in their name to disclose asset allocation at the target date adjacent to the first use of the fund name in marketing materials. That proposal aimed to prevent investors from being misled about the level of risk a fund carries at its stated retirement year. The Department of Labor separately published tips for fiduciaries under ERISA, noting that some target-date funds continue shifting allocations after the target date is reached, a detail that fiduciaries are expected to evaluate when selecting default investment options for their plans.
Despite that burst of regulatory attention, the Government Accountability Office later urged the Department of Labor to update its older guidance on target-date funds to reflect newer developments. The GAO’s work confirmed that asset managers design these funds to shift from higher-risk assets such as stocks to lower-risk assets such as fixed income over time, but it found the existing federal guidance had not kept up with how the market for these products has evolved. That recommendation signals a gap between the rules fiduciaries rely on and the current state of target-date fund design.
What 401(k) participants still do not know about their target-date fund
Several questions remain open. No publicly available federal dataset breaks down how many target-date funds in active 401(k) plans use “to” versus “through” glide paths, or what the average equity allocation looks like at and beyond the target date across major providers. Without that data, individual savers have limited ability to benchmark their own fund against the broader market. The GAO’s call for updated guidance suggests that even plan fiduciaries, the people legally responsible for selecting these funds, are working with incomplete information.
The SEC’s proposed disclosure rules on glide-path graphics and marketing names have not been finalized in the years since they were introduced. That means the labeling problem persists: two funds with “2030” in their names can carry very different levels of stock-market exposure in 2030 and beyond, and the marketing materials may not make that difference clear at first glance. Without standardized disclosures, savers must dig into prospectuses and plan documents to understand how much risk they are taking near retirement.
For anyone currently holding a target-date fund in a 401(k), the first practical step is to check the fund’s prospectus or summary document for its glide-path type. Look for whether the fund describes itself as reaching its most conservative allocation “at” the target date or continuing to adjust “beyond” the date. The asset-allocation chart will typically show the percentage in stocks, bonds, and cash at various ages or years. If the equity share remains relatively high at the target year, the fund is likely using a “through” approach, and retirees should plan for more potential volatility.
Participants should also review how the fund invests within each asset class. A conservative-sounding target-date fund can still take meaningful risk if its bond sleeve leans heavily on lower-quality credit or long-duration securities. Conversely, a fund with a higher equity allocation might diversify across domestic and international stocks in ways that spread risk. Because federal guidance has not fully standardized how these nuances are presented, savers need to rely on the descriptive sections of fund documents rather than the fund name alone.
Plan sponsors and fiduciaries face their own information challenges. The Department of Labor’s earlier guidance emphasized process: comparing different target-date series, understanding whether a “to” or “through” glide path better fits the workforce, and documenting why a particular fund was selected as the plan’s default. The GAO’s recommendation for updated guidance underscores that these decisions now play out against a more complex product landscape, with varying glide paths, underlying strategies, and fees. Without refreshed federal direction, fiduciaries must piece together best practices from older bulletins, industry research, and their own due diligence.
For workers nearing retirement, the practical implications are immediate. Someone planning to retire in 2030 might reasonably assume that a 2030 target-date fund will be largely shielded from stock-market swings by that year. In reality, the fund could still hold a sizable equity stake, particularly if it follows a “through” glide path designed to support a multi-decade retirement. That design choice is not inherently flawed-longer retirements may require more growth-but it does mean that retirees must be prepared for portfolio losses even as they begin drawing income.
The unresolved policy questions around target-date funds are unlikely to disappear. As more Americans rely on 401(k) plans as their primary retirement vehicle, the details of glide paths, disclosure rules, and fiduciary guidance will matter even more. Until regulators update their frameworks to reflect the current market, the burden falls on savers and plan sponsors to ask sharper questions: how much stock exposure remains at the target date, how quickly it declines afterward, and how those choices align with real-world retirement timelines. Clearer answers on those points could determine whether target-date funds deliver on their promise of a smoother path into retirement-or leave investors exposed to risks they never realized they were taking.
