Retirement, Meet Target Date Funds: The opportunities, and how they work

By Brian See, Evermore

Special to the Financial Independence Hub

Target date funds are a fantastic investment tool, particularly for Canadians who are saving for retirement. Despite their benefits, though, they have not been made widely available to the masses yet.

If we look at our U.S. neighbor, target date funds are already taking off. In fact, target date funds hit a record US$3.27 trillion in assets in 2021, up from $52 billion in 2020. The market value speaks for itself: target date funds are here to stay, and they’re growing in popularity.

When it comes to retirement, there are many Canadians who don’t save long-term because it seems out of reach. In fact, about 1 in 3 Canadians have never saved a dime for retirement even though the majority of Canadians have expressed concern about not having enough money in retirement. To boot, record-high inflation is leading Canadians to fear a retirement crisis, and 72% of Canadians believe saving for retirement is ‘prohibitively expensive.’

We have seen target date funds play out well in the U.S. If Canada is able to further adopt this form of investing to the market, we can close this retirement investing accessibility gap.

In order to understand the opportunities that target date funds provide for investing for retirement, it’s important to break down how they work.

How Target Date Funds work

At their core, target date funds are a one-stop-shop for long-term saving and investing. Target date funds use a systematic or rules-based asset allocation where the mix of stocks and bonds changes over time as you approach the target date. The funds are a mix of stocks and bonds that increase and decrease their risk levels according to the person’s age. This “glide path” model increases risk as you’re younger, and decreases risk as you get closer to retirement because, simply put, you’ll need that money to draw upon in retirement! Target date funds are also easy to choose. You simply pick the year you want to retire and select the target date fund with that year.

Of course, with any investment strategy, there are risks. The inherent risk here is that you are investing in the market. Stocks and bonds go up and down: they ebb and flow but in the long term, markets have increased in value. A key feature of target date funds is that they are diversified across asset classes, geographies and sectors, and that diversification helps whether there is a downturn in the market or not. Target date funds weather the storm.

Where there are risks, there are opportunities. Target date funds offer a complete hands off, one stop shop for Canadians who don’t know how to invest their money. They automatically rebalance and assess risk in real time. The assets change with life changes. The biggest benefit here is that it frees up Canadians so they can do what they want with their time.

Large Canadian corporations already offer this target date fund model with their pension and group RRSP plans, but that in itself is an issue. If a person is not with an established organization that offers target date funds, they don’t have this solution available at their fingertips.

Therein lies the question: how can Canadian DIY [Do It Yourself] investors get started and explore target date fund solutions for retirement? Here are three things they should know:

Get educated

There are a ton of free resources online that can help Canadians learn about what target date funds are and how they work. Understanding what options are available to you is a crucial step in getting started; it allows you to take control of your own financial journey.

The key here is that not all target date funds are the same, especially when it comes to fees. For example, if someone invested $5,000 per year and returned 8% per year with a 2% management fee, they would have $800,000 when they near retirement. That’s great, of course, but what if the fee was lower? If someone invested the same amount, $5,000 a year, returning 8% per year, but with a 0.5% management fee, they could earn up to $1.2 million – that’s a $400,000 difference just on fees alone! Education is key – looking for low cost options saves you money, and puts even more money back in your pocket and retirement nest egg.

Open up an online brokerage account

Brokerage accounts allow Canadians to buy and sell a variety of investments. Registered accounts such as RRSPs and TFSAs also allow Canadians to defer or avoid taxes, respectively and are invaluable when saving for retirement, as it provides Canadians with control and flexibility about how they invest for their future

Invest in low-cost ETFs

ETFs are a cost effective and easy way to invest, and finding an ETF series that uses the glide path approach is an excellent way to invest in retirement in a low cost manner. Evermore Retirement ETFs bring the target date fund asset model in the form of an ETF that all Canadians can access. As the first and only target date fund series aimed at retirement in Canada, the series provides an all-encompassing solution for Canadians that are struggling to invest.

The most important thing to know is that it’s never too late to start investing for retirement. The sooner you can get educated on the target date approach, the sooner you can save, and the better off you’ll be!

Brian See is the Chief Investment Officer at Evermore, a Canadian asset management company that issued Canada’s first and only target date ETF series aimed at retirement, Evermore Retirement ETFs.  With nearly 20 years of experience in the finance and investment industries, Brian is focused on educating Canadians on investing for retirement in a low cost and easy to access way.


Commissions, management fees and expenses all may be associated with ETF investments.  Please read the prospectus before investing.  ETFs are not guaranteed, their values change frequently, and past performance may not be repeated.

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