Like the age-resistant Baby Boomers who have embraced them, target-date retirement mutual funds are getting more aggressive about pushing back the ravages of time.

These funds — which combine various stock and bond funds from a company's roster with a particular retirement year in mind — are committing more of their money to both U.S. and foreign stocks, at the expense of more-conservative income investments. And they are keeping this assertive stance until later in retirees' lives.

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Vanguard Group and Fidelity Investments last month announced increases in the stock portions of their target-retirement funds. The moves bring them closer in line with rival T. Rowe Price Group, whose offerings already had one of the highest stock mixes.

This shift is driven partly by demographics and partly by investor demand. With more people active into their 80s and even 90s, the golden years of retirement are stretching over two decades or more. Without enough preparation there's a real risk that the gold — and other wealth — won't last.

"You've got people retiring at 55 or 60 that are going to be living to 90, 95, so you've got to plan for 40 years," said Scott Kays, a financial adviser with Kays Financial Advisory Corp. in Atlanta. "The old way of doing it is just not adequate anymore. With people living longer, they need the appreciation that stocks will give over a long period."

How the mix is juggled

Target-retirement funds automatically rebalance their stock and bond exposure over time. Crucial asset-mix decisions are made for you. Stocks are trimmed and bonds get a boost as a retirement date nears.

The asset mix is key to whether you'll meet investment goals, studies show. Stocks historically have had greater gains, with more risk. Play it too safe, and your big risk is running out of money. In part because stock-issuing companies can raise prices, stocks historically have done a better job than fixed-income bonds of countering inflation's toll on purchasing power.

"There's a big advantage to going from a 60%, moderate allocation to stocks to an 80%, moderately aggressive allocation," said Jim Peterson, a vice president at the Schwab Center for Investment Research in San Francisco. "You're getting a majority of the upside potential from stocks, but don't have the same risk as a 90% stock portfolio."

Target retirement funds currently are tied to dates ranging from 2005 to 2050, with Fidelity, Vanguard and T. Rowe Price commanding most of the market. These funds have similar objectives but aren't identical even after the recent changes at Fidelity and Vanguard. Consider three popular funds aimed at 40-something investors who plan to retire around 2025.

Fidelity Freedom 2025 Fund (FFTWX) keeps stocks at around 73%, a healthy dose for a two-decade time horizon. But it now holds more international stocks than in the past, and on the bond side will add a position in Fidelity Strategic Real Return Fund (FSRRX ) , designed as an inflation hedge.

In 2025, the fund will be 50% in stocks (that target had been 45%). In the 10 to 15 years afterward, the stock portion declines to 20%, with 80% in bonds, until eventually the fund merges with Fidelity Freedom Income Fund (FFFAX ) . Previously the transition to the 80% bond allocation took place over five to 10 years.

Gliding into the golden years

"For a retiree, your risk is longevity risk — having your assets exhaust themselves while you still need income," said Jonathan Shelon, co-manager with Ren Cheng of Fidelity's target retirement funds. "If you can look beyond short-term volatility, having a prudent asset allocation with a 'roll-down' feature — moving from 50% equities to 20% through retirement — best balances the real risks that retirees should be focused on."

The biggest transformation is at Vanguard, which is boosting the stock exposure of its target-retirement funds after a survey of shareholders indicated they were comfortable with more investment risk.

Vanguard is raising the funds' exposure to international stocks, including emerging markets. Vanguard Target Retirement 2025 Fund (VTTVX ) now will keep about 82.5% of assets in stocks versus about 60% previously. The fund's roll-down has also been extended so that 50% will be in stocks in 2025 compared with 35% before the change.

"Equity markets in particular trend up," said Catherine Gordon, head of Vanguard's Investment Counseling & Research group. "Even someone who's 45, there's 20 years to work, to save more. If there were a bump in performance, there would be options."

Still, Vanguard is known for its conservative approach, and that stock weight falls off quickly. Five to 10 years after the target date, stocks will represent 30% of the 2025 portfolio.

T. Rowe Price Retirement 2025 Fund (TRRHX ) already keeps 83.5% of assets in stocks. "The biggest risk that Americans have is outliving their assets in retirement," said Jerome Clark, manager of T. Rowe Price's target retirement lineup. "Based upon that, we took a growth-oriented approach."

In 2025, the fund will have 55% of assets in stocks, similar to Fidelity's and Vanguard's offerings. But where this portfolio stands apart is its roll-down after the target date. The stock portion descends over 30 years, so that by 2055 the fund has 20% in stocks.

"Time horizon is what's driving these products," Clark said. "And time horizon doesn't go away in retirement."

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