Finally, some good news on the savings front.

As a rule, we are far better at spending than saving. According to Bankrate, less than half of U.S. adults have salted away enough rainy-day funds to meet the recommended three months of expenses. So if millions of households have no means of covering an unexpected car repair bill, they are certainly behind when it comes to retirement.

Surveys from Gallup and other pollsters bear that out. They indicate that 40% of Americans have zero set aside in a 401(K) or IRA. Nada.

Understandably, it can be tough to think about the distant future when there are more pressing needs today. Fortunately, employers can usually point workers in the right direction and get the paperwork started. That’s half the battle. From there, just try to bump up your contributions over time.

… which brings us to the good news.

A new Vanguard 401(K) report out last month finds that participants are now depositing nearly 8% of their wages into work-sponsored plans. Including matching contributions from employers, that figure rises to 12% — a new record high.

Some of the credit goes to automatic enrollment for new hires. Most plans also make it easy to nudge contribution rates up 1% annually, allowing workers to gradually increase their monthly savings with minimal impact on the paycheck.

As one of the world’s largest wealth managers – with $10+ trillion in assets under management — Vanguard is uniquely positioned to monitor savings habits and investment behaviors.

Here’s what I found most fascinating.

Out of every dollar pumped into 401(K) plans last year, about 67 cents was directed into a so-called target-date fund. In fact, nearly three-fourths of the 5 million retirement accounts in this data set held a single target date fund and nothing else.

That means most participants have parked their entire account balance – the national average is $148,153 — in one ticker symbol.

As a hands-on investor, my retirement assets are spread across maybe a dozen different funds: mid-cap growth stocks, global bonds, even a touch of precious metals and real estate. A few are indexed or weighted by various factors; the rest pursue active strategies.

But here’s the thing: most investors are relatively passive, lacking the time or inclination (or both) to stay abreast of the macroeconomic forces that sway asset classes and keep tabs on individual fund performance.

The average 9-to-5er doesn’t spend too much time reading about the European Central Bank’s latest rate cut and pondering whether they should boost their international equity exposure from 10% to 12%. Not when the kids have to be picked up from baseball practice.

That’s exactly what makes target-date funds so appealing. They provide easy access to a diverse collection of securities conveniently wrapped up in one basket.

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These investment pools can be structured as either mutual funds or exchange-traded funds. Either way, the portfolio composition varies by date and is structured to provide an age-appropriate asset allocation mix that continually adjusts over time.

Selecting the right fund couldn’t get much simpler: just start with your birth year and add your expected retirement age.

As one of the nation’s largest custodians of 401(K) dollars, T. Rowe Price (NSDQ: TROW) offers a full suite of target date “vintages” spaced in 5-year increments from 2010 all the way through 2070.

A 25-year-old college grad just entering the workforce with 40 years of gainful employment ahead might opt for the Retirement 2065 Fund. Since younger savers have ample time to ride out market cycles and build wealth, this option is tilted towards the aggressive end of the spectrum and invests primarily (95%) in equities, including some emerging markets exposure.

On the other hand, a worker in their late-50’s whose career is winding down might be better served with the Retirement 2030. As you might expect, this buttoned-down portfolio is more conservative, trading some (but not all) of the stock exposure for a higher concentration of cash, convertibles, mortgage-backed bonds and other interest-bearing securities.

It’s important to understand that these target date funds don’t invest directly in stocks and bonds, but rather in other funds, like the T. Rowe Price Blue Chip Growth Fund or T. Rowe Price Dynamic Global Bond.

T. Rowe Price and American Funds are two of the largest actively-managed target date managers, while Vanguard and Fidelity dominate the passive (index) approach.

Regardless of flavor, all are regularly rebalanced and designed to gradually drift from stocks into fixed income over time. As workers progress through their 30s, 40s and 50s, the focus slowly shifts from the accumulation of capital to the preservation of capital as retirement age nears.

This gradual lowering of equity exposure is likened to an airplane’s “glide path” from cruising altitude down towards the runway… and hopefully a soft landing.

From practically nothing two decades ago, this class of funds exploded to $2 trillion in assets in 2020 and has since doubled to $4 trillion. So understandably, most of the larger asset managers want a piece. Aside from the issuers already mentioned, you can find target date funds at State Street, BlackRock, Schwab, JP Morgan and many others.

Retail investors appreciate these funds for their simplicity. So do brokers and registered investment advisors (the ones often calling the shots). I should note that T. Rowe Price’s target funds have outperformed their comparable peers in every rolling 10-year period over the past two decades.

So are target date funds right for you?

Well, only you can make that determination. As with any fund, you’ll want to keep an eye on expenses. While some low-cost providers maintain razor-thin expense ratios below 0.10%, others impose fees of 1.00% or more. Thanks to growing competition, the national average has fallen to just under 0.30%.

Remember, many financial advisors add another layer of management fees on top of what the fund charges. A trusted advisor can be worth every penny. But if all they are doing is sticking you in a 2050 retirement fund and sending you a Christmas card each year, I question whether they are truly earning those extra basis points in some cases.

Fees aside, the biggest question is one of motivation. Do you like doing market and economic research and checking your portfolio regularly? Or are you more of a “set-it-and-forget-it” type?

Some people feel right at home in the kitchen and prefer to hand-pick specific ingredients and prepare their own meals. Others have no interest in cooking and like the convenience of Door Dash delivery. Some handy do-it-yourselfers are comfortable with home renovation projects, while others won’t hesitate to call in a team of electricians, plumbers and carpenters.

You see where I’m going. The less comfortable you are managing your retirement assets, the more sense a target date fund makes. They are simple, effective and require very little monitoring. Between contribution inflows and market appreciation, target-date assets have been expanding at a 30% annual pace over the past 15 years.

Vanguard alone saw $200 billion in target date asset growth last year.

Now, you can attribute much of that to the fact that 90% of all 401(K) plans use target date funds as the default investment setting. If participants can’t choose from the extensive menu of investment options inside their plans, then this is automatically where their contributions are directed. Many see good results and just leave it alone – letting those small chunks of their salary continue to build.

No investment vehicle is perfect. There are several drawbacks you’ll want to consider. First, without checking the returns of each individual portfolio holding, investors only see the overall bottom-line performance. That makes it tough to know which sub-component funds are outperforming their respective benchmarks… and which are underperforming.

Even if you do spot a weak link with middling returns, there is no way to make a substitution. Nor can you overweight (or underweight) specific asset classes. That’s solely at the discretion of the fund manager.

You might not even know (without some digging) whether your 2055 retirement fund is more aggressive than someone else’s 2065. Not that two investors with the same retirement year necessarily have the same risk tolerance and investment objectives anyway.

My biggest complaint is that fund complexes each have their own area of expertise, and few of them excel at everything. Yet, target date portfolios are customarily built from within using in-house funds exclusively.

If you select your own funds to fill in the asset allocation blanks, then you can farm out each sleeve to specialists. Maybe let Franklin Templeton handle the foreign/international side, assign the bond section to the fixed income gurus at Pimco, and let Royce manage the small cap arena.

In other words, assemble an all-star team.

Of course, you can always build around a core target fund. It doesn’t have to be all-or-nothing.

Whatever you choose, maximizing retirement contributions and giving the markets ample time will put you on the best path to achieving financial independence.