To Fund

AAA

DEFINITION of 'To Fund'

A type of target-date retirement fund whose asset allocation becomes most conservative at the fund’s target date. A "to" fund might make sense for someone who expects to cash out his/her investment when the fund reaches the target date in order to purchase a different type of asset or investment.

INVESTOPEDIA EXPLAINS 'To Fund'

Target-date funds typically have a greater percentage of stocks relative to bonds the farther away the target date is. A "to" fund takes less risk than a "through" fund, and it may achieve lower returns as a result. The other big risk of using a to fund is that, if you hold it past the target date, its lack of investment risk means your nest egg will not continue to grow and you could outlive your retirement savings.

Before investing in any target-date fund, investors should examine its glide path (how it progressively becomes more conservative) to determine how the fund’s asset allocation changes over time and whether it is a "to" fund or a "through" fund.

A “to” target-date 2045 fund might have a glide path that results in an asset allocation of 0% stocks and 100% bonds and short-term funds in 2045, whereas a “through” 2045 target-date fund might still be invested 60% in stocks with the remaining 40% in bonds and short-term funds. The "through" fund’s percentage of stocks would continue to decrease gradually after the target date so that, during retirement, the percentage of bonds and cash equivalents would continue to increase. The “to” fund’s asset allocation would not change after reaching the target date. 

"Through" funds are meant to be held past their target dates, while "to" funds are likely to work best if they are cashed out and/or reinvested at their target date.

RELATED TERMS
  1. Variable Annuitization

    An annuity option in which the amount of income payments received ...
  2. Gold IRA

    Definition of Gold IRA
  3. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all ...
  4. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
  5. Through Fund

    A type of target-date retirement fund whose asset allocation ...
  6. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...
Related Articles
  1. 3 Ways To Make Your Retirement Funds ...
    Retirement

    3 Ways To Make Your Retirement Funds ...

  2. Who Actually Benefits From Target Date ...
    Retirement

    Who Actually Benefits From Target Date ...

  3. An Introduction To Target Date Funds
    Retirement

    An Introduction To Target Date Funds

  4. How To Budget Your Retirement Funds ...
    Budgeting

    How To Budget Your Retirement Funds ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center