New on FinoLib · Volume V: Personal Finance
New on FinoLib, my finance education website: I have published an article called Target-Date Funds, I Bonds and TIPS Explained, from Volume V: Personal Finance. It is part 1 of a 2-part guide. Here is what the article explains, written as a short expert briefing; the full piece, with every worked example, is one click away.
The idea in plain words
A target-date fund is a ready-made portfolio that gets safer as you near retirement, and a low-cost one is enough on its own for most people saving at work. I bonds and TIPS are government bonds that rise with inflation, so your money keeps its buying power. In October 2026 TIPS pay the higher real yield, while I bonds carry no risk of price drops and let you delay tax. Crypto has no cash flows behind it, meaning it pays nothing by itself. If you hold any, keep it small enough that losing all of it would not change your plans.
Key points
■Federal safe-harbor rules made target-date funds the usual 401(k) default; their asset-weighted average fee fell to 0.27% in 2025.
■Between the most and least aggressive series, the median gap in stock exposure is 34 points; read the glide path.
■I bonds bought May–October 2026 earn 4.26%, including a 0.90% fixed rate kept for life.
■A 5-year TIPS at 2.65% real beats a 5.01% Treasury note if inflation averages more than about 2.34%.
A closer look
Three holdings sit just outside the basics of 7.2–7.5: a fund that runs the whole allocation, two government bonds tied to inflation, and an asset that is mostly speculation.
Target-date funds. A target-date fund holds a complete portfolio — usually several stock and bond index funds — inside one fund named for a retirement year, such as “2060.” Its glide path shifts the mix from stock-heavy toward bond-heavy as that year approaches, and it rebalances automatically — 7.4’s two jobs in one place. Two details matter:
A good default for one account, one fund and no wish to manage the mix — it removes the allocation decision and the urge to tinker (7.7). When it isn’t: when it is mixed with other funds (a 2060 fund plus a separate bond fund quietly changes the designed allocation); when your pension, a partner’s portfolio or your tolerance for losses differs sharply from the average investor the glide path assumes; or when your plan’s version is expensive.
I bonds suit money needed in more than a year that you want shielded from inflation without price swings — not an emergency fund’s first months (Part 1.4).
A worked example
Worked Example — Same Glide Path, Different Fee
The household’s 401(k) receives $6,750 a year: its $4,500 deferral plus the $2,250 employer match (Part 6.5). Assume a 7% gross return for 30 years, deposits at each year-end, and two illustrative expense ratios — 0.10% and 0.60% — so the net returns are 6.90% and 6.40%. Using FV = C × [(1 + r)^n − 1] ÷ r from 7.1: 0.10% fund: $6,750 × [(1.069)^30 − 1] ÷ 0.069 = $6,750 × 92.78 = $626,253 0.60% fund: $6,750 × [(1.064)^30 − 1] ÷ 0.064 = $6,750 × 84.85 = $572,754 Half a percentage point of fee costs $626,253 − $572,754 = $53,499 — about 8.5% of the cheaper fund’s ending balance — for the same glide path and the…
Under the hood
Under the Hood: Why Target-Date Funds Became the 401(k) Default
The fund’s popularity is partly a product of law. The Pension Protection Act of 2006 added ERISA section 404(c)(5), and the Labor Department’s rule under it (29 CFR 2550.404c-5) relieves an employer of liability for investment losses on money it invests for employees who make no choice (though not of its duty to choose and monitor the fund prudently), if that money goes into a qualified default investment alternative (QDIA). One of the permitted QDIAs is a diversified fund that mixes stocks and bonds “based on the participant’s age, target retirement date … or life expectancy”: a target-date fund. The result shows in the data.
Research: What All-in-One Funds Do to Behavior
The case for a target-date fund rests less on its glide path than on what it stops people doing. In Vanguard’s 2025 plan data, 5% of participants who managed their own accounts traded during the year; among those holding a single target-date fund, 1% did.
What the full article covers
The full article includes worked examples, a look under the hood at the mechanics, a recap, a reveal-on-click quiz and the official sources behind every figure.
Volume V: Personal Finance
Read the full article on FinoLib
The complete article, Target-Date Funds, I Bonds and TIPS Explained, with every worked example, diagram, quiz and source, is free to read in Volume V, Personal Finance on finolib.com.
Explore the Finance Education Series: Vol. II — Capital Markets · Vol. I — Global Economy · Vol. III — Finance Encyclopedia · Vol. IV — Finance Careers · Vol. V — Personal Finance