Skip to Content
Fund Spy

Where Does 'To vs. Through' Fit in a Portfolio?

There is no easy answer.

Mentioned: , , , , , ,

One of the catch phrases of the target-date industry is "to versus through." The idea is that some target-date series are built to manage investors' asset allocation only "to" the time of retirement, as represented by the date on the funds (2010 or 2015, for example), while others are intended to take the investor "through" retirement. The asset allocation, or glide path, of "to" funds does not change after the retirement date, and the "through" funds feature a glide path that continues to shift toward a more conservative stock/bond mix in the five to 20-plus years following the retirement date. That basic distinction can have a big impact on how investors incorporate a target-date fund into a broader portfolio at or following retirement, but there's no easy answer to the question of what that might entail.

No One Size Fits All
The "to versus through" proposition sounds like an elegant division but is muddled in practice. In Morningstar's 2011 Target-Date Series Research Paper, we divvied up the funds based on how providers presented their glide paths in the funds' prospectuses. That exercise was admittedly a rough first pass; we found a great deal of variability within each group, and some series were tough to place in either camp.

The "to" series typically decreases equity exposure more quickly as the retirement date approaches, averaging a 33% equity allocation at the retirement date. In contrast, the "through" funds average a 49% stock allocation at the retirement date, reflecting the belief that retirees require more stock investments over longer periods in order to reduce the risk of outliving their nest egg. Yet those averages mask a wide range of risk/reward profiles within each group. The equity allocations for "to" funds ranged from 24% to 50%, and from 25% to 67% for the "through" funds. The time period that each series takes to arrive at a final asset allocation following the retirement date also ranges widely, from roughly five to 30-plus years.

Michael Herbst has a position in the following securities mentioned above: VDIGX. Find out about Morningstar’s editorial policies.