Vanguard offers target-date retirement funds to suit the needs of investors of various ages. A target-date fund is a mutual fund that automatically adjusts the asset mix and allocation over a time period that'sbased on your age and when you want to retire.
Vanguard's target-date retirement funds typically invest in other Vanguard index funds and provide investors with instant diversification. The companyoffers mutual fundsfor target retirement dates for every five years from2015 to 2065.
Below, we'll take a look at the company's funds for people who aim to retire in2030, 2040, and 2050. Each of the funds invests the majority of its assets in Vanguard index funds, and eachportfolioincludes Vanguard Total Stock Market Index Fund Investor Shares, Vanguard Total International Stock Index Fund Investor Shares, Vanguard Total Bond Market II Index Fund Investor Shares, andVanguard Total International Bond Index Fund Investor Shares.
The information in this articleis current as of July 3, 2021.
Key Takeaways
- Vanguard is well-known for its variety of low-cost index mutual funds and ETFs.
- Vanguard also offers a suite of similarly competitive target-date retirement funds.
- Target-date funds are meant to be diversified, low-maintenance investments that start out riskier and automatically shift to more conservative allocations as retirement approaches.
1. Vanguard Target Retirement 2030 Fund (VTHRX)
The Vanguard Target Retirement 2030 Fund (VTHRX)is designed for investors who wish to retirebetween 2028 and2032, and its minimum initial investment is $1,000.
The fund was issued on June 7, 2006, and has achieved an average annual return of 7.68% since its inception. Itsexpense ratio is0.14%, which is 69% lower than the average expense ratio of similar funds, according to Vanguard.
As of May 31, 2021, the net assets of the fund were $41.9 billion, of which about 65% were held in stocks and 35% in bonds. The fund had a 17% annual turnover ratio in the 2020 fiscal year.
The Vanguard Target Retirement 2030 Fund is considered a moderate-to-aggressive fund. However, theallocation of assets in the fund will changeas thetarget date approaches, and it will become more conservative over time. This makes the fund most suitable for people who want to invest in it for 10 years or longer.
2. Vanguard Target Retirement 2040 Fund (VFORX)
The Vanguard Target Retirement 2040 Fund (VFORX) is best suited for investors planning to retire between 2038and 2042, and its minimum initial investment is $1,000.
The fundwas issued on June 7, 2006, and has generated an average annual return of 8.32% since its inception.According to Vanguard, the fund also has an annual expense ratio of just 0.14%. The fund has$33.1 billion in net assets,of whichabout 80% are held in stocks and 20% are held in bonds.
The Vanguard Target Retirement 2040 Fund is also considered a moderate-to-aggressive fund. However, as with the 2030 fund, the Vanguard Target Retirement 2040 Fund will become more conservative over time astheallocation of assets in the fund change. Similarly, this fund is also best for people who want to invest for 10 years or more.
3. Vanguard Target Retirement 2050 Fund (VFIFX)
The Vanguard Target Retirement 2050 Fund (VFIFX) isfor investors who will retire between 2048 and 2052, and its minimum initial investment is $1,000.
The fund has had an average annual return of 8.56% since its inception on June 6, 2006. Its expense ratio is 0.15%, which is 67% lower than that of funds with similar holdings, according to Vanguard. The fund's net assets total$24.6 billion,and about 90% of them are held in stocks, and 10% are held in bonds.
Since the Vanguard Target Retirement 2050 Fundprimarily invests in equities or stocks, it carries a high degree of volatilityand is considered aggressive. Therefore, it's best suited for investors who can tolerate the potentially high volatility of the stock market, as well as long-term investors. Like the other Vanguard target-date funds, this one will also become more conservative over time as the allocation of its assets changes.
FAQs
Vanguard offers target-date retirement funds to suit the needs of investors of various ages. A target-date fund is a mutual fund that automatically adjusts the asset mix and allocation over a time period that's based on your age and when you want to retire.
Are Vanguard retirement target funds good? ›
Vanguard Target Retirement funds are inexpensive, diversified and designed to give you a good, but not guaranteed, investment outcome by some fixed date in the future. They do this by starting with a high equity allocation then dialling down risk by moving more money into bonds as the fund approaches its target date.
Are target date retirement funds a good idea? ›
Target-date funds can be a helpful tool to reach retirement without having to make any investment decisions. If they help you invest and stay invested throughout your career, they can be a great tool. But investors, particularly retirees, should explore all their options to ensure a target-date fund is right for them.
Is Vanguard Target retirement 2055 good? ›
The Vanguard Target Retirement 2055 fund is a solid option for people who are retiring in 2055, give or take a few years. The Fund may also be a good investment for those that want a more conservative investment and have a similar investment horizon.
How much should I put in my target-date fund? ›
Each fund is designed to manage risk while helping to grow your retirement savings. The minimum investment per Target Retirement Fund is $1,000.
What are the pros and cons of target-date funds? ›
Advantages of target-date funds include low minimum investments, professionally managed portfolios, and low maintenance for investors. Disadvantages include a one-size-fits-all approach, higher expense ratios, and a lack of diversification.
What are the disadvantages of target-date funds? ›
They May Charge High Fees
Not only might you end up on a glide path that doesn't fit your specific needs, but you might have to pay more for the pleasure of doing so. Take the Fidelity Freedom 2060 Fund, a well-regarded target date fund with a 0.75% expense ratio.
How do you make money with target-date funds? ›
Target-date funds are structured to maximize the investor's returns by a specific date. Generally, the funds are designed to build gains in the early years by focusing on riskier growth stocks, then they aim to retain those gains by weighting towards safer, more conservative choices as the target date approaches.
What Vanguard fund is best for retirees? ›
- Vanguard Target Retirement 2060 Fund (VTTSX)
- Vanguard Target Retirement 2025 Fund (VTTVX)
- Vanguard LifeStrategy Conservative Growth Fund (VSCGX)
- Vanguard LifeStrategy Income Fund (VASIX)
- Vanguard Total Stock Market ETF (VTI)
- Vanguard Total International Stock ETF (VXUS)
- Vanguard Ultra-Short Bond ETF (VUSB)
Some Cons of Target Date Funds
People should have an individualized income plan for retirement, and target date funds can't do that. Another con is that many people are not digging deep enough to find the best target date funds when it comes to internal costs, asset allocation and how the funds are managed.
To invest in a target-date fund, investors typically choose the fund with the name closest to the date they plan to retire. An investor who is age 30 and wishes to retire at age 65 might choose a target-date fund with a date close to 35 years in the future.
What are 2 benefits of investing in a target date fund? ›
Target-date funds provide a simple way to save for retirement. They offer exposure to a variety of markets, active and passive management, and a selection of asset allocation.
What is the best 2025 target-date funds? ›
- American Century One Choice Blend+ 2025. ...
- Schwab Target 2025 Index Fund. ...
- Natixis Sustainable Future 2025 Fund. ...
- MassMutual Select T. ...
- MassMutual RetireSMART by JPMorgan2025Fd. ...
- Fidelity Freedom® Blend 2025 Fund. ...
- JPMorgan SmartRetirement® Blend 2025 Fd. ...
- Columbia Adaptive Retirement 2025 Fund. CAIDX | Mutual Fund.
All Vanguard Target Retirement funds have fiscal years ending on October 31 of each year. Thus a fund's dividend and capital gains distributions for the year include distributions made in December of the prior year.
Is Vanguard Target retirement 2025 good? ›
The fund has returned -11.16 percent over the past year and 3.36 percent over the past three years. The fund has produced above-average results for some time, and is still one of the least expensive target-date funds in the industry.
Can you have multiple target-date funds? ›
Sure, these investments are designed to be standalone comprising a broadly diversified portfolio in just one investment. But that doesn't mean target-date investments and other funds can't happily exist side by side in the same portfolio. In fact, many do.
Are target-date funds too conservative? ›
Another problem with target-date funds is that they adjust the weightings based on your retirement year, when, in fact, your finish line is the day you die. Because of that, the fund might end up too conservative, leaving you with a lot of money lost in fees and not enough gains to retire in the way you would like.
What is the purpose of a target-date fund? ›
Target date funds (TDFs) mix several different types of stocks, bonds and other investments to help you take more risks when you're young, and gradually get more conservative in your investment strategy over time. Simply put, target date funds help take the guesswork out of saving for retirement.
Should I choose active or index target-date funds? ›
Index funds outperform most actively managed target-date funds. They are good for investors who are risk-averse and have a long time horizon. Target-date funds may be tax-advantaged, however, since they are approved for inclusion in 401(k)s. However, they require an investor to stick with one fund family.
What happens when a target-date fund reaches its target date? ›
A target-date fund may be designed to take you "to" or "through" retirement. Generally, a "to retirement" target-date fund will reach its most conservative asset allocation on the date of the fund's name. After that date, the allocation of the fund typically does not change throughout retirement.
Nothing special happens with a Target Retirement Fund when it reaches its target date. The fund doesn't stop investing, and you don't need to take your money out of the fund. The gradual move from stocks to bonds simply continues.
