Target Date Funds: 5 Things Christians Need to Know Before Setting and Forgetting

You clicked "enroll" on your 401(k) sometime between a performance review and a lunch break, scrolled past a few fund choices you didn't recognize, and selected the one that said 2055 next to it because that's roughly when you plan to stop working. Decent logic. Then you moved on with your life.

That was probably six, eight, maybe twelve years ago.

The fund is still there. The money is growing -- you check the balance occasionally and feel good about the number. But here's the question worth asking: do you actually know what's inside that fund? Who built the glide path it's riding? Whether the companies it owns are ones you'd write a personal check to?

Target date funds are one of the most widely used investment products in America, and most people who own them couldn't describe them in a single sentence. That's not an indictment -- it's by design. They're built to be ignored. The problem is that "easy to ignore" and "right for your situation" are not the same thing.

Here's what you need to know.

1. The Glide Path Doesn't Know You

A target date fund works by assuming you'll retire in the year printed on the label. Based on that assumption, it adjusts its stock-to-bond ratio over time -- heavier on stocks when you're young, gradually shifting toward bonds as you approach the target date. The technical term for this automatic shift is a glide path.

The concept is sound. The execution assumes things about you that may not be true.

If you're 37 years old and your 401(k) is sitting in a Target Date 2040 fund because you told your HR portal you wanted to retire at 52, there's a real chance you're already invested more conservatively than your timeline warrants. Glide paths vary significantly by fund family -- some are more aggressive early on, others more conservative -- and the spread between them at any given point in your career can be surprisingly wide. Meanwhile, someone your age working with an advisor who actually knows their risk tolerance, income trajectory, and time horizon might be in a portfolio that looks nothing like what your fund defaulted to.

The math on that difference is not small. Historically, portfolios with higher equity allocations have produced meaningfully higher average annual returns over long time periods.

The compounding effect of even a 1-2% annualized return gap, sustained over 20 or 30 years, can amount to a significant dollar difference in a retirement account. The fund doesn't know how long you expect to work, whether you have a pension, a spouse's income, or rental revenue that might justify staying in equities longer. It just knows the year.

This isn't an argument against target date funds categorically. It's an argument for knowing what you actually own.

2. The Fee Spread Is Wider Than You'd Think

One of the genuine selling points of target date funds is cost. The cheapest options -- Vanguard and Schwab, for instance -- run at around 0.08% per year. That's essentially free. You'd pay $8 annually on every $10,000 invested.

But not all target date funds are priced that way.

According to Morningstar, the asset-weighted average expense ratio across target date funds was 0.29% in 2024. And some actively managed funds push toward 0.50% or higher. That sounds like a rounding error. Over thirty years of compounding, it's not.

The same concept underlying every other financial decision applies here: fees are a guaranteed drag on returns. A 0.08% expense ratio and a 0.50% expense ratio on the same underlying portfolio concept will produce different ending balances, and the difference grows the longer the money compounds.

Here's the practical problem: many 401(k) plans only offer one family of target date funds, and employees rarely look up the expense ratio. You might be sitting in an actively managed fund charging five times what a comparable index-based option would cost, and you've never thought to check. If your plan offers multiple share classes or fund families, that number is worth a five-minute lookup on the fund's fact sheet.

If you're in an IRA or HSA -- accounts where you choose your own investments -- this is even more relevant. You have full optionality. Defaulting to a higher-cost fund in an account where you could own nearly anything is a stewardship decision you're making by not making one.

3. One Size Doesn't Fit Your Plan

Target date funds are built for the median investor. The median investor doesn't exist.

The glide path issue is part of this -- but there's a broader point. A target date fund has no idea whether you have a pension, a paid-off rental property, or a spouse who plans to keep working for another decade past your retirement. It doesn't know you'll receive a significant inheritance, or that you have a family member with a disability whose care will require ongoing financial support. It doesn't know whether you intend to work part-time in retirement, consult, or spend the first two years traveling at a pace that burns through cash faster than the fund's income assumptions.

All of these factors affect what a genuinely appropriate portfolio allocation looks like for you. The fund ignores all of them.

This is not a unique problem with target date funds -- it's the structural limitation of any one-size-fits-all financial product. The fund's entire design is premised on the idea that you don't want to make decisions. In many contexts, that's a reasonable tradeoff. But it's worth knowing that the tradeoff exists.

There's also the question of Social Security timing, Roth vs. traditional account balance ratios, Required Minimum Distribution exposure, and tax bracket management in early retirement -- all of which affect the right equity-to-bond mix at any given point in your 50s and 60s. A target date fund is managing one variable: time. A real financial plan manages many.

4. Fees Can Vary Even Within the "Same" Fund

This one is slightly technical but worth knowing, especially if you're looking at your 401(k) statement.

Many fund families offer the same target date fund strategy in multiple share classes, and the share class your employer selected affects what you pay. An institutional share class of a fund might run at 0.08%. The retail share class of what is functionally the same fund might run at 0.40%. Employees in the same company can end up in different cost structures depending on how the plan was structured, or whether the employer negotiated better pricing.

The upshot: the name on the fund and the cost of the fund are two different things. If your 401(k) statement shows a target date fund, look for the expense ratio -- usually available on the fund's fact sheet or on the plan's investment options page. Then compare it to the index-based alternatives at Vanguard (0.08%), Schwab (0.08%), or Fidelity's index-based Freedom series (0.12%). Those numbers are publicly available and easy to find.

This matters more in some plan types than others. Your 401(k) menu is whatever your employer negotiated. Your IRA, Roth IRA, HSA, and 529 are fully in your control.

5. There's a Better Answer for Your IRA -- and It Starts With Your Convictions

This is where I'll be direct with you.

If you're a Christian who believes money is a tool for God's purposes, that stewardship means actively directing resources rather than passively accumulating them, and that the companies you invest in are worth thinking about -- then a target date fund held in your personal IRA is probably not the best fit.

Here's why: a target date fund, by definition, owns a broad slice of the market. The market includes companies actively funding things you are almost certainly praying against -- abortion providers, exploitative business models, industries built on addiction, agendas that contradict the values you're raising your kids to hold. The fund doesn't know your convictions. It owns what the benchmark owns.

That might be a reasonable trade inside a 401(k) where your options are limited and your ability to change the menu is nil. But in your IRA or Roth IRA? You have full control over what you own. Every dollar. You can choose individual securities, ETFs, or mutual funds that screen specifically for alignment with a biblical worldview -- without giving up broad diversification or, in many cases, competitive long-term performance. Individual results vary by fund, time period, and market conditions, and past performance is not a guarantee of future results.

This category of investing -- biblically responsible investing, or BRI -- has grown significantly in both quality and availability over the last decade. Expense ratios on BRI ETFs have become increasingly competitive. A growing body of research is examining BRI fund performance across full market cycles, with results encouraging enough to make the old "you'll sacrifice returns to align your values" objection harder to sustain than it used to be.

Two examples worth knowing: the Inspire 100 ETF (BIBL), launched in 2017, has tracked a biblically screened index of U.S. large-cap companies for nearly eight years, with an average annual return since inception of 13.24% (as of 6/192026) -- broadly in line with the broader market over that period. The Inspire 500 ETF (PTL), launched in 2024 at a 0.09% expense ratio, is the lowest-cost faith-based ETF currently available (as of September 2025, per Inspire Investing) and points to where this space is heading. Neither is a guarantee of any particular outcome. Both demonstrate that aligning your investments with your convictions is increasingly a real choice, not a concession. Past performance does not predict future results. Individual fund results will vary.

The point isn't that BRI is a guaranteed superior outcome. The point is that when you have full discretion -- as you do in every account you open yourself -- you have the opportunity to make your investment decisions consistent with the rest of your financial life. If you're tithing intentionally, giving to ministries you believe in, and making purchasing decisions with some awareness of where the money goes, then parking twenty years of retirement savings in a fund you've never looked at is an inconsistency worth resolving.

A target date fund is a default. It's not a decision. And the Christian who believes money is a stewardship responsibility -- not just an accumulation tool -- probably shouldn't be making financial decisions by not making them.

So What Should You Do?

Start by finding out what you actually own. Pull up your 401(k) or IRA statement, identify the fund name, look up the expense ratio, and check whether it's an index-based or actively managed fund. That's a fifteen-minute exercise that most people never do.

If you're in an employer plan: your options may be limited, but you may have more flexibility than you realize. Some plans offer a self-directed brokerage window that opens access to a wider fund universe, including BRI options.

If you're in an IRA, Roth IRA, or HSA: you have full discretion. A target date fund may still be appropriate depending on your situation -- but it should be a considered choice, not a default.

And if you're wondering whether your overall investment strategy is actually aligned with your financial plan and your values -- that's worth a conversation.

Want some help thinking this through? I did too. That's part of why I started Openhanded Wealth -- to walk with folks like you through decisions that feel complicated, but don't have to stay that way. If you've got questions, reach out. I'm a real person, and I won't pressure you into buying products you don't need. You don't have to navigate this alone. [Email Me] or [Schedule a Call]

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