What Is a Target-Date Fund? 2025 Guide for Australian Investors

For Australians planning for retirement or other long-term goals, target-date funds have emerged as a simple yet effective investment vehicle. Whether you’re a first-time investor or a superannuation member looking to set-and-forget, understanding how these funds work—and how they match your risk profile—can make a significant difference to your financial future.

How Target-Date Funds Work

Target-date funds (TDFs) are managed investment products designed to grow assets for a specific future year—your “target date.” In Australia, they’re commonly used within superannuation, but are also available as managed funds for individual investors. The main appeal? Professional management and automatic rebalancing over time.

• Glide path: The asset allocation of a TDF shifts from growth-focused (higher shares and property) to conservative (more bonds and cash) as you approach the target date.
• One-stop solution: TDFs bundle a diversified mix of assets, removing the need to manually adjust your portfolio.
• Lifecycle management: The fund’s strategy changes automatically, reducing risk as you get closer to needing the money.

For example, a 2050 target-date fund might start with 80% in shares and 20% in fixed income. By 2049, it could have shifted to 40% shares and 60% fixed income, aiming to cushion your savings from market shocks just before retirement.

Risk Tolerance and Target-Date Funds in 2025

Australians’ appetite for risk varies widely, and 2025 brings its own set of challenges. With inflation moderating after the pandemic-era surge and the Reserve Bank of Australia (RBA) signaling a steady interest rate environment, investors need to think carefully about risk and reward.

Target-date funds are designed to align with a “typical” investor’s risk tolerance for a given retirement horizon. However, they aren’t a one-size-fits-all solution. Here’s what you need to consider:

• Your age and goals: The further away your target date, the more risk (and potential growth) the fund will take on your behalf.
• Market conditions: As of 2025, super funds are facing tighter regulations on fees and performance. Many have adjusted their glide paths to be more conservative, especially after the market volatility of recent years.
• Personal risk appetite: If you’re more cautious than average, a TDF may feel too aggressive in early years; if you’re comfortable with volatility, you might find it too conservative as you near the target date.

It’s also worth noting that some Australian super funds, such as AustralianSuper and Hostplus, have introduced “lifecycle” or “MySuper” options that operate much like target-date funds, automatically adjusting risk as you age.

Example: Investing in a 2045 Target-Date Fund

Let’s say in 2025, you’re 35 years old and plan to retire at 55, making a 2045 fund a good fit. Here’s how it might look:

• Initial allocation (2025): 75% Australian and international shares, 15% property, 10% fixed income and cash.
• Midway point (2035): 60% shares, 25% property and infrastructure, 15% bonds/cash.
• Near retirement (2045): 40% shares, 10% property, 50% fixed income and cash.

Suppose you invest $50,000 in 2025. If markets perform in line with the SuperRatings median balanced fund (historically around 6.5% per annum), your balance could reach about $178,000 by 2045, assuming no further contributions. The gradual shift towards conservative assets helps shield you from a major downturn just before retirement—a key benefit of the TDF approach.

However, if you experience a change in your financial situation, or if you want more control, you can always switch to a different fund or adjust your strategy. Many Australians also use TDFs in combination with other investments to tailor their overall risk exposure.

Are Target-Date Funds Right for You?

Target-date funds are most suitable for those who want a low-maintenance, professionally managed investment aligned with a future goal like retirement. As of 2025, with ongoing regulatory scrutiny and an increased focus on member outcomes, these funds are more transparent and better monitored than ever before.

• Advantages: Automatic rebalancing, professional management, diversified exposure, and a strategy that evolves with your needs.
• Potential drawbacks: Not tailored to unique circumstances, may be too conservative or aggressive for some, and fees can vary—so compare options carefully.

Before selecting a target-date fund, review the fund’s glide path, check recent performance, and confirm the fee structure. In 2025, regulatory bodies like APRA and ASIC continue to crack down on underperforming super funds, making it easier for Australians to compare and switch if necessary.