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  • A target date fund is a fund of funds that allows you to link your investment portfolio to a particular time horizon, typically your expected retirement date.

    In fact, a target date fund characteristically has a date in its name, such as a 2015 Fund or a 2030 Fund.

    A target fund aiming at a date in the somewhat distant future tends to have a fairly aggressive asset allocation, with a focus on growth. As the target date approaches, the fund is designed to become more conservative to preserve the assets that have accumulated and eventually to provide income.

    Each fund company formulates its own approach to risk, so that the allocation of one 2025 Fund may be noticeably different from the allocation of a 2025 Fund from a different company.

    You can find model portfolios and statements of investment strategy in the fund's prospectus. Each mutual fund company that offers target date funds tends to offer a series, with dates five or ten years apart.

    Most companies populate their funds of funds with individual funds from their fund family, though some companies add mutual funds or exchange traded funds from other investment companies.

    Like other funds of funds, the fees you pay for a target date fund may be higher than you would pay to own each of the individual funds separately. However, these fees pay for an additional level of professional oversight.

  • Browse Related Terms: Asset allocation, Asset class, Balanced fund, diversification, Family of funds, Financial plan, Fund of funds (FOF), Lifecycle fund, Modern portfolio theory, Nonsystematic risk, Overweighted, portfolio, subclass, Synthetic investment, Target date fund, Target risk fund, Underweighted, White knight

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  • A tax bracket is a range of income that is taxed at a specific rate.

    In the United States there are six brackets, taxed at 10%, 15%, 25%, 28%, 33%, and 35% of the amount that falls into each bracket.

    For example, if your taxable income was high enough to cross three brackets, you'd pay tax at the 10% rate on income in the lowest bracket, at the 15% rate on income in the next bracket, and at the 25% rate on the rest.

    The rates remain fixed until they are changed by Congress, but the dollar amounts in each bracket change slightly each year to adjust for inflation.

    In addition, the income that falls into each bracket varies by filing status, so that if you file as a single taxpayer you may owe more tax on the same taxable income as a married couple filing a joint return.

  • Browse Related Terms: Effective tax rate, flat tax, Marginal tax rate, Private letter ruling, Progressive tax, Regressive tax, Tax bracket

All > Business > Finance > Personal Finance > Income Tax

All > Business > Finance > Personal Finance

All > Business > Finance > Personal Finance > Income Tax

Also listed in:

All > Business > Finance > Personal Finance > Income Tax

All > Business > Finance > Personal Finance > Income Tax

All > Business > Finance > Personal Finance

All > Business > Finance > Personal Finance > Retirement

All > Business > Finance > Personal Finance

All > Business > Finance > Personal Finance > Income Tax

All > Business > Finance > Personal Finance > Income Tax

All > Business > Finance > Personal Finance > Income Tax

All > Business > Finance > Personal Finance > Income Tax

All > Business > Finance > Personal Finance > Income Tax

All > Business > Finance > Personal Finance

  • Some investments are tax exempt, which means you don't have to pay income tax on the earnings they produce.

    For example, the interest you receive on a municipal bond is generally exempt from federal income tax, and also exempt from state and local income tax if you live in the state where the bond was issued.

    However, if you sell the bond before maturity, any capital gain is taxable.

    Similarly, dividends on bond mutual funds that invest in municipal bonds are exempt from federal income tax. And for residents of the issuing state for single-state funds, the dividends are also exempt from state and local taxes.

    Capital gains on these funds are never tax exempt.

    Earnings in a Roth IRA are tax exempt when you withdraw them, provided your account has been open for five years or more and you're at least 59 1/2 years old. And earnings in 529 college savings plans and Coverdell education savings accounts (ESAs) are also tax exempt if the money is used to pay qualified education expenses.

    When an organization such as a religious, educational, or charitable institution, or other not-for-profit group, is tax-exempt, it does not owe tax of any kind to federal, state, and local governments. In addition, you can take an income tax deduction for gifts you make to such organizations.

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