DEFINITION of 'Through Fund'
A type of target-date retirement fund whose asset allocation includes higher risk and potentially higher return investments "through" the fund’s target date and beyond. A "through" fund might make sense for individuals who only need to sell a small percentage of their investments each year to meet their retirement living expenses and who want to continue investing during their retirement years.
BREAKING DOWN 'Through Fund'
The farther away a fund’s target date is, the more stocks it will usually hold relative to bonds. A "through" fund takes more risk, for longer, than a "to" fund. Both reach conservative positions at the target date, but through funds invest less conservatively. This gives them the potential for greater returns – and also greater losses – from the beginning. In addition, their strategy means that a through fund will contain assets that can grow beyond the target date, enabling you to continue to build assets during your retirement. By doing this, a through fund also lowers the risk of outliving your retirement savings.
Before choosing a specific target-date fund for your retirement savings, research its glide path (how it progressively becomes more conservative) to learn how the fund’s asset allocation will change over time. Also determine whether it is a "through" fund or a "to" fund.
A through target-date 2045 fund might have a glide path that results in an asset allocation of 60% stocks and 40% bonds and short-term funds in 2045. The percentage of stocks would decrease gradually during your retirement years, while the percentage of bonds and short-term funds would increase. But even at the target date, there would be both stocks and bonds/short-term funds in your through fund and this pattern would continue during retirement.
Through funds are meant to be held past their target dates, while to funds are likely to work best for you if they are cashed out and/or reinvested at their target date.