What Is a Through Fund?

A through fund is a type of retirement fund that continues to automatically reallocate the fund’s holdings to a different mix of assets after the owner of the fund retires. A through fund is in contrast to a regular target-date fund, also known as a “to fund,” which ceases reallocating investments at the date of retirement.

Understanding Through Funds

Both through funds and to funds will typically hold a greater share of risky assets when the fund holder is further from retirement, and slowly shift toward holding a greater share of safe assets as the fund owner ages. Usually, this means owning a large share of equities, which tend to carry more risk, when you first start to save for retirement, and gradually selling those assets and purchasing bonds with the proceeds, as bonds tend to carry less risk. 

Through funds tend to start with a more risky mix of assets than to funds. 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 earn large returns during retirement.

Choosing the Right Through Fund

Before choosing a specific target-date fund for your retirement savings, research its glide path, or the manner in which it progressively becomes more conservative, to learn how the fund’s asset allocation will change over time. 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.

Pros and Cons of Through Funds

A through fund is riskier than a to fund, so savers should only consider them if they are not particularly worried about exhausting their retirement savings too early. Through funds are advantageous for savers who have a lot of extra capital, and want to continue earning a healthy return even during retirement.