Target date fund vs. index funds: The Midflorida Credit Union Checklist

The glide path at 50

A target date fund moves money from stocks to bonds as its named year approaches, while a 3-fund index mix holds US stocks, international stocks and bonds in percentages you choose. The label alone tells little: some funds stop changing at the target year, while others keep reducing stocks for years afterward.

A switch between funds inside a 403(b) does not create a tax bill. New contributions matter more in the catch-up years: the IRS limit for 2026 adds $8,000 at 50+ and $11,250 at ages 60–63. Money needed within about 5 years, such as a lump-sum choice or a child’s down payment, does not belong in either stock-and-bond choice.

How much does a pension change the right stock share?

A pension changes the stock share because it covers part of the retirement paycheck without selling investments. A single nurse relying on 1 pension may still need caution, while 2 pensions covering most household spending can support more stock. At $100K, a 0.40% fund versus a 0.05% mix costs $350 annually; at $600K, the gap is $2,100.

Retiring at 60 with pension income delayed until 65 also argues for more bonds, since the 403(b) must cover 5 years of retirement paychecks.

Bev at 58: one fund or four?

Bev is 58, a divorced ICU charge nurse working 3 twelve-hour shifts each week, with 2 adult children and 4 accounts from 3 hospitals (hypothetical, round numbers). She has about $620K in 403(b)s and old 401(k)s. Her current hospital account holds $300K in a 2030 target date fund, and her pension choice is roughly $1,100 monthly or a $180K lump sum.

Her target date fund holds about 45% in stocks and charges 0.40% annually. The arithmetic is plain: $300K × 0.40% = $1,200 annually. Its stock holdings equal $300K × 45% = $135K. If Bev elects the monthly pension, it covers about $13K annually of spending, so this particular account may not need to supply her first dollars for several years.

Midflorida Credit Union would put the fund’s stock share beside the pension estimate before suggesting a change. Bev chose a 3-fund mix: 45% US stocks, 15% international stocks and 40% bonds. At 0.05%, $300K × 0.05% = $150 annually. That is $1,050 less each year, or about $10.5K over 10 years before growth. To test your own account, enter your 403(b) balance and both expense ratios in the site calculator.

The trade-off is real. Bev’s stock holdings rise from $135K to $180K. A 20% stock decline would cut the account by about $36K, compared with about $27K in the original fund. Account values can fall below the amount you put in, especially when stock shares are higher.

She turned on the 403(b)’s automatic annual rebalancing, so the 60% stock mix does not become a chore between shifts. A 2030 target date fund was her second choice. It would have been simpler, but in this illustration it still cost $1,200 annually and did not give her as direct a way to account for the pension.

Bev’s 2030 fund

The work each choice leaves behind

The switch before the next paycheck

If this is you, change the future contribution election and the existing balance separately, because most 403(b) portals treat them as 2 elections. First, pull the fund list and expense figures from the annual fee disclosure. The Department of Labor requires participant fee information for covered retirement plans, and the disclosure is where the fund cost usually appears.

Next, record the current stock share and the stock share you are choosing. Then make the contribution change, followed by the balance exchange if that is still the decision. Check the round-trip trading rule before clicking submit. Some hospital plans bar a return to the same fund for 30–90 days, which is the practical limit on reversing this move.

Adding a separate bond fund beside a target date fund can quietly make the account much more cautious than intended. Put $210K in a 45%-stock target date fund and $90K in a bond fund, and stocks fall to about 31% of the $300K account. Assuming stocks earn 3% more annually than bonds, for illustration, the $40.5K moved out of stocks gives up about $1,200 annually. A target date fund already contains bonds.

Midflorida Credit Union and the 403(b) default

Midflorida Credit Union starts with the fund your 403(b) placed you in, its stock share today and at its target year, and its annual dollar cost. Then we set those figures beside your pension estimate and the date this account must start paying you. The result goes on a one-page roadmap short enough to walk your family through at the kitchen table.