Vanguard targeted retirement fund

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Vanguard Target Retirement Funds

Nonretirement accounts, Roth and traditional IRAs, SEP-IRAs, UGMA/UTMA accounts, and education savings accounts (ESAs)
We charge a $20 annual account service fee for each Vanguard fund with a balance of less than $10, in an account. This fee doesn't apply if you sign up for account access on and choose electronic delivery of statements, confirmations, reports, prospectuses, and other important documents. This fee is automatically waived for Voyager, Voyager Select, Flagship, and Flagship Select Services clients.

We charge participants a $25 annual account service fee for each fund they hold in their Vanguard SIMPLE IRA. This fee is automatically waived for Voyager, Voyager Select, Flagship, and Flagship Select Services clients.

(b)(7) plans
We charge participants a $15 annual account service fee for each fund they hold in their Vanguard (b)(7) account. This fee is automatically waived for Voyager, Voyager Select, Flagship, and Flagship Select Services clients.

Individual (k) plans
We charge participants a $20 annual account service fee for each fund they hold in their Vanguard Individual (k) account. This fee is automatically waived for everyone in the plan if at least one participant is a Voyager, Voyager Select, Flagship, or Flagship Select Services client.

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The Best Target Date Funds For Retirement

We considered several factors to identify the best target date funds, including fees, performance, asset allocation and glide path.


Studies show that fees are a good indicator of a fund’s success. The lower the fees, the more likely the fund will outperform its more expensive counterparts. That’s not to say that expenses should be our only criteria, but they are an important one.

Most of the funds in our list have expense ratios below 50 basis points, and the most expensive is 80 basis points. There are target date funds, however, that cost more than basis points. We believe that the performance of these funds do not justify the cost.


While target date funds have been around since the s, performance data is limited. Because mutual fund companies have made changes to their target date funds, performance data are limited to 5-year returns. Our list will likely change as year returns become available over the next several years.

Asset Allocation

The asset allocation of a target date retirement fund changes over time. In funds, equities are heavily weighted as investors have 40 years until retirement. In contrast, funds typically have no more than about 50% in equities, as those retiring in begin to use fund assets for living expenses.

While we weren’t looking for one “right” allocation, we did look for equity allocations above 80% in funds. The seven funds in our list typically allocated 90% to equities, although one fund had an 85% allocation. For the funds we examined, the range of equity allocations was more varied. They ranged from a high of 60% to a low of 35%.

Based on research by William Bengen (and others) on the 4% rule, we believe a retiree should have an equity allocation of at least 50%. As the allocation falls below this level, the longevity of the portfolio decreases. In other words, the odds of a retiree running out of money during retirement goes up. Unfortunately, while some target date funds maintain a 50% equity allocation at retirement, they all fall significantly below this level as the retiree ages.

Glide Path

Glide path describes how the asset allocation of a target date fund changes over time. There are “to” and “through” glide paths. With a “to” glide path, the allocation does not change once the fund reaches its designated year. For example, a fund’s asset allocation wouldn’t change in , , or even

In contrast, a “through” glide path continues to alter the asset allocation of a fund after its designated year. All of the funds in our list use a “through” glide path. For some, the changes in asset allocation stop after about five to seven years. For others, the changes continue for decades.

While we are agnostic on the “to” versus “through” debate, the same is not true for the stock to bond allocation. In all target date funds we examined, the equity allocations fall far below the 50% mark. As such, those using target date funds should carefully consider whether these funds best meet their needs in retirement.

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The Best Vanguard Funds for (k) Retirement Savers

No other fund firm in the country has a bigger hand in retirement savings than Vanguard.

Among the most widely held funds in (k) plans, roughly a third are Vanguard funds. So in this, our annual review of the biggest retirement savings plan, we take a closer look at some of Vanguard's most popular funds in (k) accounts, and rate them Buy, Hold or Sell.

Several are index funds, which we do not rate. It's not that we don't like them. We do. But decisions to buy an index fund generally hinge on whether you seek exposure to a certain part of the market. And for the most part, index funds fulfill their purpose – they track the indexes they mirror, less expenses.  

But actively managed funds are different.

Some are better than others. Managers change, which can affect a fund's returns. Underperforming funds might be lagging for a good reason; say, its investment style is simply out of favor. That's why we analyze only the actively managed funds from Vanguard in this story. We also review the firm's two target-date series, Institutional Target Retirement and Target Retirement, which are among Vanguard's most popular (k) funds and are due to merge (more on that below). Both series hold mostly index funds, but active decisions are made on asset allocation.

This story – as well as our upcoming reviews of other big fund firms in the (k) world, including Fidelity, T. Rowe Price and American Funds – is meant to help savers make good choices among the funds available in their (k) plan.

Let's look at some of the best Vanguard funds for your (k) plan … and weed out a few lesser options, too. For simplicity's sake, and to make comparisons more even, where possible we cite data and returns for Vanguard's Investor share class, which is open to retail investors.

Returns and data are as of Oct. 6. In each review, we refer to the symbol, returns and expense ratio of the share class that is available to most investors. The reason for this is that the share classes of specific funds offered in (k) plans can vary, depending in part on the size of the plan.

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Vanguard Equity-Income: BUY

American dollars
  • Symbol:VEIPX
  • Expense ratio: %
  • 1-year return: %
  • 3-year annualized return: %
  • 5-year annualized return: %
  • year annualized return: %
  • Rank among the top (k) funds: #52
  • Best for: Investors looking for a steady dividend fund.

Two longtime fund managers recently stepped down at Vanguard Equity-Income, which is a member of the Kiplinger 25 – our favorite actively managed no-load funds. But we're not adjusting our Buy recommendation for the fund – yet.

Although manager changes can be tricky, in VEIPX's case, the managers who left are part of Vanguard's in-house quantitative equity group, which relies on a complex algorithm to choose stocks. That computer model shouldn't change with the new guard. Plus, the quant group runs just one-third of the portfolio.

However, the lion's share of the portfolio is run by Wellington Management's Michael Reckmeyer, who recently announced plans to retire in June That could affect our thoughts on the fund moving forward, so stay tuned.

Since Reckmeyer arrived in mid, Vanguard Equity-Income has returned % annualized. That lags the % gain in the S&P , but it beats 89% of funds that invest in large-company stocks trading at a value. It's important to bear in mind that value stocks have lagged their fast-growing growth stock counterparts for much of the past five years. Compared with a value-tilted index, the S&P Value, Vanguard Equity-Income comes out ahead by an average of percentage points per year.

Reckmeyer favors high-quality companies that pay increasingly higher dividends over time. "We focus on sustainable payouts and companies that increase dividends on an annual basis," he says, "because over the long haul, dividends drive 40% of returns over the years."

But Reckmeyer likes a good bargain. He prefers to step in when the market overreacts to bad short-term news. "It's a bit of a contrarian take to dividend investing," he says. He picked up shares in the paint and coatings company PPG Industries (PPG) in early , for instance, after shares in the economically sensitive stock plummeted as global economies fell into a recession. Reckmeyer had long been watching the stock and saw a deal in shares in the global company, which boasts a strong balance sheet and steady cash flow. Since then, PPG shares have recovered 77%.

Vanguard Equity-Income might not beat the S&P over time. But it's not too far behind, and the ride is smoother than that of the broad index. Plus, the fund's dividend yield, %, beats the current % yield of the S&P

Learn more about VEIPX at the Vanguard provider site.

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Vanguard Explorer: BUY

A school of little fishes chasing a large fish
  • Symbol:VEXPX
  • Expense ratio: %
  • 1-year return: %
  • 3-year annualized return: %
  • 5-year annualized return: %
  • year annualized return: %
  • Rank among the top (k) funds: #78
  • Best for: Aggressive growth minded investors looking for exposure to small-company stocks.

Vanguard Explorer holds stock in growing, small to midsize companies. It's one of a handful of small-company stock funds that rank among the top (k) funds. But while many are index-based, this one is actively managed. In fact, in keeping with the Vanguard way, many have a hand in VEXPX.

Managers from five different firms work independently, applying their own process to run their portions of the fund's assets:

  • Wellington Management, for example, picks stocks with higher growth potential relative to their valuations.
  • ClearBridge Investments focuses on industry leaders that generate substantial free cash flow (money left over after necessary expenses to sustain the business) and make wise capital allocation decisions.
  • ArrowMark Colorado Holdings prefers high-quality companies with strong competitive advantages in industries with high barriers to entry.
  • Stephens Investment Management and Vanguard's quantitative equity group round out the investing subadvisory team.

The hodgepodge management team results in returns that are just above-average. But the portfolio is enormous, with close to stocks, and the fund has $ billion in total assets, which makes VEXPX the biggest actively managed small-company fund in the country. Finally, multiple changes in subadvisory managers over the years – and even recently – makes it difficult to confidently assess how the fund will fare over a full market cycle.

Seven of the 10 managers on the fund have been in place for nearly five years. And in each of the four full calendar years since the start of , Vanguard Explorer has outpaced the Russell In other words, you have been better off in Explorer than in a small-company index fund over that time.

Just bear in mind: Because small-company stocks tend to be more volatile than large-company stocks, VEXPX should be a held as a complement to a core holding in large-company stock fund or a total stock market fund.

Learn more about VEXPX at the Vanguard provider site.

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Vanguard Inflation-Protected Securities: BUY

Stack of pennies
  • Symbol:VIPSX
  • Expense ratio: %
  • 1-year return: %
  • 3-year annualized return: %
  • 5-year annualized return: %
  • year annualized return: %
  • Rank among the top (k) funds: #76
  • Best for: Older investors in small doses to hedge against inflation.

With inflation running higher than it has in nearly a decade, Treasury Inflation-Protected Securities (TIPS) are more in the news. Annual inflation for the month period ending in August, the most recent data available, was %. That's more than double the roughly 2% rate of annual inflation over each the previous five calendar years.

Investors who want to stay ahead of rising consumer prices typically turn to TIPS because on top of a guaranteed rate of interest, the principal of the bond moves in step with the rate of inflation.

But yields on TIPS have been negative for months. Vanguard Inflation-Protected Securities' current yield, for instance, is negative %. That doesn't mean, however, that you will earn a negative return in this fund. Rather, the fund's return will be the rate of inflation less the negative yield. Over the past 12 months, for instance, despite negative yields, VIPSX has gained %.  

Longtime fund manager Gemma Wright-Casparius favors short-term maturity TIPS these days. Almost half of the fund's assets are invested in TIPS with maturities of less than five years. Vanguard studies show that short-term TIPS are more stable during periods of inflation surprises than medium- and long-term TIPS.

Vanguard Inflation Protected Securities is best for retired, or nearly retired, investors. Younger investors can fend off inflation with the returns in their hefty stock portfolios, and annual salary raises will help, too. However, retirees typically don't have either of those advantages.

Learn more about VIPSX at the Vanguard provider site.

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Vanguard International Growth: BUY

Cityscape of Guiyang at night, Jiaxiu Pavilion on the Nanming River. Located in Guiyang City, Guizhou Province, China.
  • Symbol:VWIGX
  • Expense ratio: %
  • 1-year return: %
  • 3-year annualized return: %
  • 5-year annualized return: %
  • year annualized return: %
  • Rank among the top (k) funds: #36
  • Best for: Foreign stock exposure.

We have long lauded Vanguard International Growth as a superstar for delivering above-average returns with below-average risk. But we're feeling a little cautious these days because a key manager is leaving in April

Investment firm Baillie Gifford is one of two subadvisers that run the fund, but it manages the biggest chunk (70%) of the assets. And James Anderson, a manager since , is leaving. Comanager Thomas Coutts remains, however, and he's been in place since late Lawrence Burns was named comanager in

Managers from Schroders run the remaining 30%, and nothing is changing there. Simon Webber has been with the fund since late , though he too, has a new comanager in James Gautrey, who joined in late

The two firms, both U.K.-based, have slightly different approaches to picking growth stocks; Vanguard chose them to complement each other. Baillie Gifford is willing to pay up for stocks with explosive growth. Schroders' ideal stock is underappreciated but growing fast.

The portfolio holds roughly stocks, mostly in large companies domiciled in developed countries. But China stocks make up 17% of the assets. Chinese internet powerhouses Tencent Holdings (TCEHY) and Alibaba Group (BABA), for instance, are two of the portfolio's biggest holdings and make up nearly 8% of assets. Those stocks have underperformed recently because of a regulatory crack-down on tech firms and other shake ups in China. But other top holdings have posted triple-digit percentage gains over the past 12 months, including biopharmaceutical Moderna (MRNA) and ASML Holding (ASML), which makes lithography systems that helps semiconductor makers to make smaller and smaller chips.

VWIGX has long been one of our favorite international stock funds. But we'll be watching it carefully over the next year or two. Fund manager changes can sometimes (but not always) result in some portfolio volatility as new managers settle in and make their mark.

Learn more about VWIGX at the Vanguard provider site.

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Vanguard Primecap: BUY

Finance and investment concept. Button on car dashboard. There is sales text on the button and it is pointing high efficiency.
  • Symbol:VPMCX
  • Expense ratio: %
  • 1-year return: %
  • 3-year annualized return: %
  • 5-year annualized return: %
  • year annualized return: %
  • Rank among the top (k) funds: #7
  • Best for: A core holding for aggressive investors with long time horizons.

Vanguard Primecap was closed to all investors long ago, but if it's offered in your (k) plan, you can still put away up to $25, a year. Consider yourself lucky. Vanguard Primecap is a superb fund run by five of the best stock-pickers in the country.

The managers – Theo Kolokotrones, Joel Fried, Alfred Mordecai, M. Mohsin Ansari and James Marchetti – work independently managing their own slice of the fund's assets. But they each aim to invest in growing companies that trade at bargain prices. In particular, they look for a catalyst – a new product, new executives at the helm or a restructuring – that they think will push a stock price higher over the next three to five years.

Once they buy a stock, they tend to hang on. The fund's 6% turnover ratio is a fraction of the 55% to 87% turnover of typical U.S. stock funds that invest in large companies.

"Because the Primecap team is buying stocks facing near-term uncertainty, it often takes time for their ideas to work out," says Dan Wiener, editor of The Independent Adviser for Vanguard Investors. "But in contrast to many other growth managers, the Primecap team is willing to wait, and on average holds onto a stock for a decade."

VPMCX's record isn't blemish-free, of course. Despite a year annualized record that beats the S&P , Vanguard Primecap has lagged the index in five of the past 10 full calendar years, most recently in A sizable helping of airlines stocks – including Southwest Airlines (LUV), United Airlines (UAL) and American Airlines (AAL) – hurt the fund when the economy shut down for COVID

But over the long haul, Vanguard Primecap shareholders have gotten a lot richer. A $10, investment 20 years ago in VPMCX would be worth nearly $80, today; a similar investment in Vanguard Index fund would be worth $55, And that doesn't include any regular monthly (k) contributions you might make.

This is an aggressive fund, best for investors with long time horizons and a stomach for some volatility.

Learn more about VPMCX at the Vanguard provider site.

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Vanguard U.S. Growth: BUY

A white arrow going up a set of blue stairs
  • Symbol:VWUSX
  • Expense ratio: %
  • 1-year return: %
  • 3-year annualized return: %
  • 5-year annualized return: %
  • year annualized return: %
  • Rank among the top (k) funds: #91

Best for: Steely investors with a long time horizon who want exposure to fast-growing, large companies and can withstand a lot of volatility.

Vanguard U.S. Growth has put up some good returns in certain years – lately, a 59% return in – but it has had to deal with a lot of change. For starters, it has twice absorbed the assets of a poorly performing peer fund – Growth Equity in and Morgan Growth in

Then there's the constant rotation of subadvisers at the fund. According to Morningstar, eight partial manager changes have occurred at the fund since The latest on took place in early Vanguard jettisoned investment firm Jackson Square as a manager after 11 years. Four subadvisers remain: Wellington Management, Jennison Associates and Baillie Gifford – each runs roughly 28% of assets – and Vanguard's in-house quantitative equity group, which runs the rest. This year, the quant group is undergoing its own reshuffling; longtime members of the team James Stetler and Binbin Guo both retired.

All that moving around of parts is troubling, and it makes assessing the long-term merits of a fund tricky. But based on more recent performance, things are going swimmingly. VWUSX's five-year annualized return beats the S&P , most of its peer group and even Vanguard Primecap, the firm's venerated growth-company fund. It has been a bumpy ride, though. Over the past five years, this Vanguard fund has experienced above-average volatility compared with all large-company growth funds.

If U.S. Growth is the only actively managed large-company growth fund offered in your (k), and you have the stomach for a lot of volatility, it's a solid option. If you're not that kind of investor, however, you might consider other options in your plan that come with less uncertainty (as far as management goes) and a little more steadiness in performance.

Learn more about VWUSX at the Vanguard provider site.

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Vanguard Wellesley Income: BUY

A field of dollar bills
  • Symbol:VWINX
  • Expense ratio:
  • 1-year return: %
  • 3-year annualized return: %
  • 5-year annualized return: %
  • year annualized return: %
  • Rank among the top (k) funds: #96
  • Best for: Conservative investors.

Vanguard Wellesley Income celebrated its 50th anniversary in July. But it's not the oldest stock-and-bond fund in Vanguard's stable. That honor goes to Vanguard Wellington, which we'll get to momentarily.

But unlike Wellington, Wellesley Income tilts more toward bonds than stocks. Two-thirds of its assets are bonds, while the rest is stocks. (Wellington holds more stocks than bonds).

The hefty bond holding makes for a steady fund. Over the past half century, according to Dan Wiener, editor of The Independent Adviser for Vanguard Investors, Wellesley Income's "standout feature is its steadiness."

Steadiness and muted returns often go hand in hand, however. Over the past 15 years, VWINX's % annualized return doesn't keep pace with the broad market, but it beats 96% of its peers: funds that allocate 30% to 50% of assets to stocks.

Michael Reckmeyer runs the stock side and Loren Moran picks the bonds. Both managers are veterans of Wellington Management – an investment firm with long-term ties that subadvises many of Vanguard's best-known actively managed funds. Similar to Vanguard Equity-Income, which Reckmeyer also helps to manage, we'll need to keep an eye on VWINX going forward.

With the heavy load of bonds in its portfolio, Wellesley Income is best suited to conservative investors.

Learn more about VWINX at the Vanguard provider site.

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Vanguard Wellington: BUY

Stack of bills
  • Symbol:VWELX
  • Expense ratio: %
  • 1-year return: %
  • 3-year annualized return: %
  • 5-year annualized return: %
  • year annualized return: %
  • Rank among the top (k) funds: #10
  • Best for: Moderately conservative investors who seek an all-in-one portfolio that holds stocks and bonds.

Vanguard Wellington has a long history and a standout long-term record. Founded in , it is the nation's oldest balanced fund. Roughly two-thirds of the fund holds stocks; rest of the portfolio is devoted to bonds.

VWELX – another member of the Kiplinger 25 – has undergone a bit of a changing of the guard at the top. Daniel Pozen, a comanager since , took over as sole manager of the stock side of the fund in July ; Loren Moran, a comanager on the bond side since , is now the fund's sole bond picker after a comanager retired in June

On the stock side, Pozen favors high-quality large companies with a competitive edge over peers. Alphabet (GOOGL), Microsoft (MSFT) and Facebook (FB) were top holdings at last report. He has trimmed the number of stocks in the portfolio from the high 80s to the high 60s since taking over.

"There are only so many great ideas in the market at any time that we should lean into the best ideas and make sure they can impact shareholders' investment outcomes," Pozen says.

Stocks aren't required to pay a dividend to be considered for the portfolio, but roughly 85% of the stocks in the fund do.

On the bond side, Moran tilts heavily toward high-quality corporate debt, but spices up returns with investment-grade asset-backed securities and taxable municipal bonds. She holds roughly one-quarter of the fixed-income portfolio in Treasuries and agency bonds to maintain liquidity – easy access to cash – in VWELX. That's less than the typical 30% of assets that peer balanced funds hold on average.

"Our liquidity buffers are something we focus on," Moran says. But with interest rates so low, "shareholders aren't being paid a lot," she adds, so she has dialed her cash position down.

Vanguard Wellington is a moderate-risk investment choice because it holds both stocks and bonds. But it still packs a punch. Compared with other balanced funds, VWELX boasts above-average returns and below-average volatility. Over the past five years – which includes the period that Moran has been with the fund – Vanguard Wellington beats 88% of its peers with an % annualized return. It yields %. But yet again, we'll be watching the fund closely given the manager change.

Learn more about VWELX at the Vanguard provider site.

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Vanguard Windsor II: HOLD

Sale tag on red blouse
  • Symbol:VWNFX
  • Expense ratio: %
  • 1-year return: %
  • 3-year annualized return: %
  • 5-year annualized return: %
  • year annualized return: %
  • Rank among the top (k) funds: #35

We're upgrading the recommendation on Vanguard Windsor II this year a tad, to a Hold from a Sell.

In last year's review of Vanguard's most popular (k) funds, we said that investors who had chosen an S&P index fund over Vanguard Windsor II would have done better over the past decade. That's still true.

But context matters. VWNFX focuses on value-priced stocks – and those stocks have lagged growthier shares by a wide margin. And relative to its peers – funds that invest in value-priced large companies – Vanguard Windsor II is starting to shine brightly. Over the past two years, the fund's % annualized return ranks among the top 3% of all large value funds.

A change in management might be behind the fund's recent fortunes. In late , Vanguard dismissed two subadvisers and added a new one: Aristotle Capital Management. Aristotle joins three other firms: Lazard Asset Management, Sanders Capital and Hotchkis & Wiley Capital Management.

Each firm has a value bent but slightly different approaches. Lazard focuses on highly profitable companies trading at low relative valuation. Hotchkis & Wiley favors measures such as tangible assets, sustainable cash flow and the potential for business performance to improve. Sanders looks for companies that trade at a discount to its assessment of expected total return. And Aristotle likes to invest in high-quality businesses all over the world that trade at attractive prices and that have a catalyst to kick share prices up over a three- to five-year period. The firms run slivers of the portfolio independently. As a whole, the fund holds roughly stocks.

Since adding Aristotle, the fund has taken a heavier tilt toward technology from the high-single digit exposure of previous years, says Morningstar Analyst Alec Lucas. At last report, tech stocks made up 20% of the fund. Alphabet, Apple (AAPL) and Microsoft sit near the top of the portfolio.

The good news: That has been good for performance. The bad news: It means VWNFX is a tad more growthy than some of its large-company value fund peers. But Windsor II still retains a distinct value profile: The portfolio's price-to-earnings (P/E) ratio of 18 is higher than the 16 P/E of other large-value funds, but it's a far cry from the 31 P/E ratio of the typical growth fund. We're comforted, too, by how well the fund performed between mid November and June when value stocks soared over fast-growing companies. During that roughly month period, Vanguard Windsor II held up fabulously, beating the S&P by nearly nine percentage points. It beat 61% of its peers, too. Of course, that is a blip of a time period, especially for retirement savers who are investing for the long term. Even so, it's a good indication that the fund firm has finally got a winning combination of managers.

We're more optimistic about the future of Windsor II, but we're still watching it closely, which explains the Hold recommendation.

Learn more about VWNFX at the Vanguard provider site.

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Vanguard Target Retirement Funds: BUY

A middle-aged couple looking at retirement plans
  • Rank among the top (k) funds: #11 (VTHRX, ); #12 (VTTVX, ); #15 (VTTHX, ); #19 (VFORX, ); #23 (VTWNX, ), #25 (VTIVX, ), #29 (VFIFX, ); #65 (VFFVX, ); #82 (VTXVX, ); #88 (VTINX, Income)
  • Best for: Savers who want to make one investment decision and leave the rest to the experts.

Target-date funds hold stocks and bonds and are designed to help people invest appropriately for retirement. Experts make the investing decisions, rebalance the portfolio when needed and shift holdings to a more conservative mix as you age. When the fund hits its target year, the work doesn't stop. Vanguard Target Retirement funds continue to shift its blend of stocks and bonds for seven years after the target year. At that point, the money in the fund automatically rolls into Vanguard Target Retirement Income, which holds a static allocation of roughly 30% stock and 70% bond.

A small change is ahead for Vanguard's target-date funds. The firm actually has two target-date series: the Institutional Target Retirement funds and the Target Retirement funds. They are run with exactly the same strategy, same glide path (the blend between stocks and bonds that shifts over time as the target date nears). But Institutional Target Retirement was created for specifically for defined contribution plans; Target Retirement is available to retail investors as well as in some defined contribution plans. Come February , however, the Institutional series will be absorbed into the Target Retirement series and expense ratios across all target-year funds will fall to %.

That's a bonus for retirement savers, some more than others. VanguardTarget Retirement ,  and  currently charge % in annual expenses, so this fee cut represents a nearly 50% drop in fees. Expenses aren't uniform across the target-date series currently, so shareholders in the nearer dated funds stand to save a little less. The investor share class of Vanguard Target Retirement , for instance, charges % per year. In any case, Vanguard fees are already about 75% cheaper than most of its peers – one feature we've always liked about the series.

Another thing this series has going for it is simplicity. Vanguard Target Retirement funds hold just five to six index funds in their portfolios, depending on the target year. Four of the funds are total market funds – Vanguard Total Stock Market Index (VTSAX), Vanguard Total Bond Market Index (VBTLX), Vanguard Total International Stock Index (VTIAX) and Vanguard Total International Bond Index (VTABX). The series also includes a short-term inflation-protected securities index fund in the nearer-dated years.

Investors should feel confident choosing a Vanguard Target Retirement fund for their retirement savings. These products are straightforward, low-cost and do all of the work for you.

Learn more about Vanguard's Target Retirement Funds at the provider site.


Vanguard Cuts Target-Date Fund Fees as Fidelity Continues to Gain Momentum

Investing in low-cost target-date funds continues to get cheaper. On Sept. 28, , Vanguard announced plans to merge the Vanguard Institutional Target Retirement series into the Vanguard Target Retirement series in February , with the result that shareholders in both will pay less.

The merger makes sense as the portfolios of these legally separate funds are practically identical. The main difference between them, in other words, has been fees and investment minimums. The institutional version of the series has charged % for defined-contribution plans with at least $5 million. Plans below that threshold could invest in the investor series for % to %, depending on the target-date vintage. Meanwhile, investors outside of a defined-contribution plan have had a low minimum investment of $1,

Once the merger finishes, all shareholders will pay %, and there will be no plan-level minimum; investors outside of a plan will still have the $1, minimum. This puts the series on par with Schwab Target Index as the cheapest target-date series that don't have a minimum threshold at the plan level.

Vanguard's fee cut also makes it generally cheaper than the Fidelity Freedom Index series, which has emerged as the top competitor to Vanguard's low-cost target-date throne. Although Fidelity Freedom Index, which has a Morningstar Analyst Rating of Silver, does have one share class at the % price range and another at % for plans with at least $2 billion, as of Sept. 29, it still had a $5 million plan level minimum threshold, and its investor share class charges % across the series. Given Vanguard's announcement, we don't expect it to stay that way for long, though.

Fidelity Beating Vanguard's Retail Business at Its Own Game

Fidelity hasn't been shy in keeping up with Vanguard's retail business when it comes to fees and investment minimums for its Freedom Index series. Exhibit 1 shows how the fees for the versions of the lowest-minimum-investment share classes of each series have trended over time, including the projected fees for the Vanguard series once it reaches its single-share-class state in

From through the September , Fidelity was consistently cheaper, though never by more than a few basis points. Yet, following the merger, Vanguard will cost less for the first time in a decade.

History suggests Fidelity won't stay idle. In June , for example, both series launched institutional share classes priced at %. When Vanguard dropped its fees to % in , Fidelity then chopped its levy to % in

More recently, Vanguard cut its institutional shares' minimum investment to $5 million in December from $ million previously. A month later, Fidelity made the same cut to its institutional shares' minimum.

The competition has been a boon for Fidelity. Since , Fidelity Freedom Index has supplanted Vanguard's retail business as the top index-based target-date series among mutual funds. Fidelity's net $34 billion of inflows into its index-based series nearly tripled Vanguard's $13 billion haul. It's a stark reversal from the previous two years, when Vanguard’s retail business brought in more than $70 billion of net inflows while Fidelity garnered less than $20 billion.

Exhibit 2 shows the annual flows into each mutual fund series since  

… but Not With Larger Plans

Fidelity's success has mostly been confined to mutual funds though. Vanguard has retained its lead when it comes to institutionally focused collective investment trusts, or CITs. These vehicles are only available through (k) plans and are most popular with the largest plans. That's because unlike mutual funds, plan sponsors can negotiate fees on CITs, and the largest plans use this to their advantage. Obviously, when the cheapest share class of the mutual fund is already as low as Vanguard's and Fidelity Freedom Index's, there's only so much room to lower fees. But when it's a multi-billion-dollar plan, every basis point counts. For example, for a $10 billion plan that had been paying %, a drop to % cuts the collective fees that participants pay from $10 million to $5 million from $10 million.

Exhibit 3 shows the flows into each series' CITs since  

Since the biggest plans favor CITs, Vanguard's advantage with this vehicle has propelled it to larger overall flows in year-to-date Still, the momentum Fidelity has developed in target-date mutual funds is impressive.

The Tale of the Tape

Recent performance may be driving some of Fidelity's momentum. Exhibit 4 shows the average Morningstar Category rank for each vintage of both series' investor share classes over major trailing periods. 

Fidelity holds an edge over the past three and five years ended Aug. 31, though Vanguard still wins out over the longer year period. Both have struggled over the trailing one-year period.

Each series holds 40% of its equity portfolio in international stocks, which is about 10 percentage points higher than the average target-date fund, and that's been a headwind as U.S. stocks have continued to outpace the rest of the world in

On the bond side, they've faced an additional challenge from rising interest rates, which has been a common pain for index-based target-date series.

It's All About the Bonds

Going forward, the performance of the series' fixed-income portfolios will determine the ultimate winner, especially since both series' equity glide paths are also very similar, as Exhibit 5 shows. 

Vanguard does start to lower its allocation to stocks a little sooner than Fidelity. After reaching the target date, it has one of the sharpest equity drops in the first five years of retirement before settling at its 30% equity landing point. That's 11 percentage points higher than Fidelity's. Yet, both have an average allocation of about 62% to stocks across the glide path, so the differences should even out over time.

The bond portfolios are very different, though. Vanguard invests 30% of its fixed-income portfolio in Vanguard Total International Bond (VTIBX), which hedges out international currency exposure from its underlying bonds. Fidelity doesn't include any strategic allocation to non-U.S. bonds, though it does take a more nuanced approach by including long-duration U.S. Treasuries, which have historically been a strong diversifier for portfolios with lots of equity exposure.

A Win-Win for Investors

Given their low costs and broad straightforward portfolios, both series have considerable appeal, as signified by their Analyst Ratings of Silver, which indicates one of our highest conviction levels in a target-date strategy's ability to outperform its category benchmarks on a risk-adjusted basis. That Vanguard and Fidelity are competing on price is ultimately a win for investors in either, who will get to keep more of what of each series earns.  


Retirement vanguard fund targeted

3 Best Vanguard Target Retirement Funds

Deciding which mutual funds are appropriate for a retirement portfolio requires a good understanding of investment strategies. Vanguard target-date funds do the work of rebalancing over time so investors don't have to. They start with an allocation favoring stocks in the early years of an investor's life cycle, typically 90% stocks and 10% bonds.

As an investor approaches his retirement age, Vanguard gradually rebalances its asset allocation in favor of less risky securities, such as bonds and short-term reserves. Vanguard target-date funds come with an average expense ratio of %. The industry average expense ratio for comparable target-date funds is %. Beginning in February , Vanguard increased the international equity and fixed income allocations for its target-date funds to provide investors with improved global diversification.

The Vanguard Target Retirement Fund

The Vanguard Target Retirement Fund has a target date that ranges from to Because the fund is very close to its target date, its portfolio has a large number of bond holdings, which tend to be less risky when compared to stocks.

In particular, the fund invests in various Vanguard equity and bond funds, resulting in a % allocation to domestic stocks, a % allocation to international stocks, a % allocation to U.S. corporate and Treasury bonds, and an % allocation to international bonds. Domestic equity holdings of this fund are broadly diversified across the entire U.S. equity market.

Over the years, the Vanguard Target Retirement Fund, and Vanguard target-date funds, in general, tend to focus more on higher-quality bonds and Treasury inflation-protected securities (TIPS) compared to other fund families. This approach provides better protection of capital against volatility and real value erosion.

The Vanguard Target Retirement Fund has a four-star rating from Morningstar and an expense ratio of %. As the fund gets close to , it plans to have higher asset allocation to bonds, in the realm of 50%. This fund is most appropriate for investors who are highly cost-conscious and plan to retire between and 

The Vanguard Target Retirement Fund

The Vanguard Target Retirement Fund offers a one-stop broadly diversified portfolio with a target date between and Like other Vanguard target-date funds, this fund invests in four Vanguard index funds with asset allocations of about 85% in equities and 15% in corporate and sovereign bonds.

About % of the fund's assets are allocated to domestic equities, while 33% are dedicated to international equities. There is a 12% allocation in U.S. corporate and Treasury bonds and a % allocation of international bonds. As the fund is nearly 20 years away from its target date, it will continue allocating more assets to risky securities in the next five to 10 years.

The Vanguard Target Retirement Fund has an expense ratio of % and it has a four-star rating from Morningstar. Due to Vanguard's larger emphasis on international bonds and international equities, the fund provides broader diversification and better return prospects in the long run, as overseas markets—especially emerging markets—tend to grow faster compared to developed markets.

The Vanguard Target Retirement Fund is most appropriate for investors whose target retirement is between and and would like to invest in one fund and not have to worry about rebalancing until their retirement.

The Vanguard Target Retirement Fund

The Vanguard Target Retirement Fund offers lifecycle asset allocation for investors with specific retirement dates. This fund is most attractive for investors who just started their careers and have over 40 years before retirement. As the fund is very far from its target date, 90% of its assets are allocated to domestic and international stocks. The remaining 10% of its assets are split between U.S. and international bonds. The fund is likely to stick to such aggressive allocation until ; after that, it will start smoothly adjusting its allocation every year toward bonds.

The Vanguard Target Retirement Fund has an expense ratio of % and a four-star rating from Morningstar. This fund is most appropriate for investors who desire automatic asset rebalancing at a low cost and who are not planning to retire until between and 

Vanguard Target Retirement Funds Review - Invest and Forget

Fund giant Vanguard this week said it will merge more than $ billion of its Target Date Retirement funds, which are ubiquitous and popular in (k) plans.

Chairman Mortimer “Tim” Buckley said Vanguard will save investors $ million in fees, or about % of assets, with the move. Vanguard currently manages $ trillion in investor money across all its funds.

Some criticized the consolidation, saying that “Vanguard could have saved investors money years ago” with the same consolidation of share classes, said Dan Wiener, editor of the Independent Adviser for Vanguard Investors newsletter, which tracks the performance of Vanguard funds. “I’m all for saving investors money, but Vanguard had the ability to do so many, many years ago and they didn’t.”

But other experts said target date funds across the industry have helped Americans invest in the stock and bond markets at lower costs. Today, both Target Date funds hold about $59 billion in institutional shares and $39 billion of investor shares in total assets.

“The argument about ‘why not sooner?’ is splitting hairs,” said Michael Finke, a professor of wealth management at American College of Financial Services in King of Prussia.

“Compared to the year , the quality of investment portfolios is far higher and costs far lower” overall, Finke said.

Vanguard’s average expense ratio for target date funds is %, while the industry average expense ratio for comparable target-date funds is %, he said, citing Investment Company Institute data.

“We are in a much better place today than before target date funds. Workplace retirement plan sponsors have an incentive to offer low-cost target date funds. They might get sued if costs are too high,” he added. “Investors are comparatively getting an amazing deal with target date funds.”

Take Vanguard’s Target Retirement fund. The institutional class of shares charges a % expense ratio, because within the fund, Vanguard uses lower-cost share classes in the portfolio. Vanguard’s Total Stock Market Index Fund Institutional shares, for example, cost %.

The mom-and-pop version — investor shares — of Target Retirement cost %. Many of the underlying share classes are also the more expensive investor shares. The Total Stock Market Index Fund investors shares, which the fund holds, also cost %.

Finke notes that the price cut is another salvo in the fee war among Vanguard, Fidelity, and Schwab and other leading investment firms. “Vanguard has about 60% of the target date fund market,” he said.

So why the merger now? Vanguard may be having trouble lowering costs further, Wiener said.

It may also be a way for Vanguard to stand out to employers deciding which funds to use in their retirement plans.

As fees begin to approach zero, Vanguard now has to compete on customer service and the “user experience” on its website and trading apps, said Michael Foy, J.D. Power’s head of Wealth Intelligence, based in New York.

“The race to zero for trading fees is over. We’re almost at the finish line,” Foy said. “You’ve got to differentiate on customer experience. Vanguard in the past struggled with customer service, such as people having to wait hours to talk to someone.”

The solution is the better online experience, he said.

“If you provide someone with easy access to information, they won’t have to pick up the phone. It’s a lot cheaper to address investor needs through the app or the website, than pay a customer service rep,” Foy said.

J.D. Power’s most recent digital experience survey ranked Charles Schwab No. 1 for a slick, helpful experience on its website and trading apps. Schwab ranks highest in retirement plan digital satisfaction with a score of out of 1, possible points. Bank of America (formerly Merrill) ranked second with a score of , and AIG Retirement Services ranks third with a score of

Fidelity came in No. 5 and Vanguard No. 13 out of eighteen firms.

Fidelity said it’s taken heed of investors accustomed to a seamless online experience — not just with banking apps such as Venmo and Paypal — but with consumer favorites Uber and DoorDash.

“The way younger investors demand we engage with them as a result of the pandemic isn’t going to stop now,” said Kelly Lannan, vice president of young investors at Fidelity.

One outcome of the pandemic was “young people paid attention to their finances a lot more,” Lannan said.

Fidelity took feedback from consumer sites such as Reddit and changed its trading apps after this year’s GameStop and Robin Hood controversy over the stocks skyrocketing without any apparent cause.

“A lot of individual investors, many younger, said on Reddit that our education and data were very sound, but the user interface felt outdated. We no longer get compared to other finance sites, but to every shopping app” such as Amazon, Lannan said. “That’s the standard to which they hold us.”

    Erin Arvedlund

    I cover all things personal finance and investing, as well as Wall Street frauds and other miscreants. I'm open to all tips.


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