Vanguard Target Retirement Funds: Choosing Your Investment Strategy

Vanguard Target Retirement Funds are a way to invest throughout your career and into retirement. They are designed to manage risk while growing your retirement savings. Each fund invests in several other Vanguard funds to create a broadly diversified mix of stocks, bonds, and, in some cases, short-term reserves. The year in a Target Retirement Fund's name is its target date, the year in which Vanguard expects an investor in the fund will retire and leave the workforce. The funds start with an allocation that favors stocks in the early years of an investor's long-term time horizon. As an investor progresses through their career, Vanguard gradually rebalances its target retirement fund's asset allocation in favor of less risky securities, such as bonds and short-term reserves.

Vanguard's Target Retirement 2025 Fund

Vanguard Target Retirement Funds are a way to invest throughout your career and into retirement. Each fund is designed to manage risk while helping to grow your retirement savings. The minimum investment per Target Retirement Fund is $1,000. The Vanguard Target Retirement 2025 Fund (VTTVX) is designed for those born between 1958 and 1962, who are either in retirement or very close to it. The fund has a four-star rating from Morningstar and an expense ratio of 0.08%, which is 82% less than the industry average.

The Vanguard Target Retirement 2025 Fund has a target date range of 2021 to 2025. As the fund is very close to its target date, it has a large number of bond holdings, which are less risky compared to stocks. In particular, the fund invests in various Vanguard equity and bond funds, resulting in a 31.80% allocation of domestic stocks, a 21.30% allocation of international stocks, a 28.60% allocation of U.S. corporate and Treasury bonds, and a 12.40% allocation of international bonds. The fund also has a 5.90% allocation of short-term inflation-protected securities. Domestic equity holdings of this fund are broadly diversified across the entire U.S. equity market.

The Vanguard Target Retirement 2025 Fund is most appropriate for investors who seek low fees and plan to retire between 2023 and 2027. The fund's managers gradually shift the asset allocation to fewer stocks and more bonds, so the fund becomes more conservative as you near retirement. This fund is professionally managed and automatically rebalanced, freeing you from the hassle of ongoing rebalancing.

Vanguard's Target Retirement 2040 Fund

Vanguard Target Retirement Funds are a way to invest throughout your career and into retirement. A single Target Retirement Fund can serve as a complete, diversified retirement portfolio. Each fund is designed to manage risk while helping to grow your retirement savings. The minimum investment per Target Retirement Fund is $1,000.

The Vanguard Target Retirement 2040 Fund (VFORX) offers a one-stop, broadly diversified portfolio for investors who plan to retire between 2038 and 2042. The fund invests in Vanguard index funds with asset allocations of 76.94% in stocks, 22.19% in bonds, and 0.87% in short-term reserves. 47.5% of the fund's assets are allocated to domestic equities, while 30.1% are dedicated to international equities. There is a 15.6% allocation of US corporate and Treasury bonds and a 6.8% allocation of international bonds. The fund is about 15 years away from its target date.

The Vanguard Target Retirement 2040 Fund has an expense ratio of 0.08%, and a four-star rating from Morningstar. Due to Vanguard's emphasis on international bonds and international equities, the fund provides broad diversification. The fund has a 10-year return of 7.95% and a minimum investment requirement of $1,000.

Different funds with the same target date can have different asset allocations in stocks and bonds. Make sure the fund that interests you has an asset allocation that matches your tolerance for risk and need for growth.

Vanguard's investment professionals manage each fund, gradually adjusting its investment mix to become more conservative as the target date approaches. The target date is not the end—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. Target Retirement Funds are designed to keep your money invested appropriately throughout your retirement years.

Vanguard's Target Retirement 2055 Fund

Vanguards Target Retirement 2055 Fund (VFFVX) is designed for people who are planning to retire between 2051 and 2055. As the fund is still far from its target date, 89.63% of its assets are allocated to domestic and international stocks, with 9.70% of its assets split between US and international bonds, and 0.67% as short-term reserves. The fund will likely stick to this type of aggressive allocation for several years. After that, it will start smoothly adjusting its allocation every year towards bonds.

The Vanguard Target Retirement 2055 Fund has an expense ratio of 0.08% and a four-star rating from Morningstar. Its 10-year return is 8.51% and its minimum investment is $1,000. This fund is most appropriate for investors who desire automatic asset rebalancing at a low cost and who are not planning to retire until 2051 to 2055.

Vanguard Target Retirement Funds are a way to invest throughout your career and into retirement. A single Target Retirement Fund can serve as a complete, diversified retirement portfolio. Each fund invests in several other Vanguard funds to create a broadly diversified mix of stocks, bonds, and, in some cases, short-term reserves. The year in a Target Retirement Fund's name is its target date, the year in which Vanguard expects an investor in the fund to retire and leave the workforce.

Vanguard's investment professionals manage each fund, gradually adjusting its investment mix to become more conservative as the target date approaches. The funds start with an allocation that favours stocks in the early years of an investor's long-term time horizon. That means an allocation of approximately 90% stocks and 10% bonds. As an investor progresses through their career, Vanguard gradually rebalances its target retirement fund's asset allocation in favour of less risky securities, such as bonds and short-term reserves.

Vanguard's average expense ratio

Vanguard Target Retirement Funds are a way to invest throughout your career and into retirement. Each fund is designed to manage risk while helping to grow your retirement savings. The minimum investment per Target Retirement Fund is $1,000.

Each Target Retirement Fund invests in several other Vanguard funds to create a broadly diversified mix of stocks, bonds, and, in some cases, short-term reserves. The year in a Target Retirement Fund's name is its target date—the year in which Vanguard expects an investor in the fund to retire and leave the workforce.

Vanguard Target Retirement Funds come with an average expense ratio of 0.08%. According to Vanguard, the industry average is 0.48%. The average Vanguard Target Retirement Fund expense ratio is 82% less than the industry average.

The funds start with an allocation that favours stocks in the early years of an investor's long-term time horizon. That means an allocation of approximately 90% stocks and 10% bonds. As an investor progresses through their career, Vanguard gradually rebalances its target retirement fund's asset allocation in favour of less risky securities, such as bonds and short-term reserves.

The closer an investor is to retirement, the more conservative a fund's investment mix will be. The more distant the retirement is, the more aggressive a fund's investment mix will be.

Vanguard's Target Retirement Income Fund

Vanguard Target Retirement Funds are a way to invest throughout your career and into retirement. A single Target Retirement Fund can serve as a complete, diversified retirement portfolio. Each fund is designed to manage risk while helping to grow your retirement savings. The minimum investment per Target Retirement Fund is $1,000.

The Vanguard Target Retirement Income Fund is designed for investors who are already retired. It has a fixed investment allocation and is intended to provide income to retirees while seeking to preserve the original investment. About seven years after a fund reaches its target date, its investment mix is expected to match that of the Vanguard Target Retirement Income Fund.

The funds' managers gradually shift each fund's asset allocation to fewer stocks and more bonds so the fund becomes more conservative as you get closer to retirement. Vanguard Target Retirement Funds give you access to thousands of U.S. and international stocks and bonds. Managers maintain the current target mix, freeing you from the hassle of ongoing rebalancing.

The average Vanguard Target Retirement Fund expense ratio is 82% less than the industry average. When you're paying less for your funds, more money stays in your account working for you.

Frequently asked questions