Are Target Retirement Funds Good Investments
They can be. They offer the convenience and benefits of diversification. Plus, they provide smart, automatic rebalancing of their asset allocations to match investors’ changing risk tolerance. Investors who have just started their careers could have an allocation that aggressively seeks growth and high returns.
As their careers progress, their target retirement funds will rebalance allocations of assets to focus on less risky securities and protect value. Of course, no investment is without risk. Investors should plan to review their target retirement fund performance, allocation, and fees at least annually.
Your Daily Roundup Of The Latest Fund Launches Manager Moves And Strategy Shifts
Fidelity has made another change on one of its Select portfolios after a handful of manger moves in the past few weeks.
has left Fidelity, and has come off the $181m portfolio as a result, according to a filing with the Securities and Exchange Commission.
Ruth Nagle has replaced him on the fund, per the filing. A spokesperson for Fidelity confirmed the changes.
This is the latest change of several on that line of Fidelity funds over the past three months. Earlier this year, Hiroki Sugihara stepped on the $191m Fidelity Select Automotive portfolio fund to replace .
In early January, Mattingly was named sole portfolio manager on the $952m , taking over from .
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How Do Target Retirement Funds Work
Target retirement funds are long-term investments that offer an asset allocation designed to change over time. They automatically rebalance from a more aggressive growth stance toward a more conservative one, as the years pass.
These funds invest in a larger allocation of higher risk securities for higher returns in earlier years. Then, with time, funds gradually transition to a wealth-preserving mode by allocating more to less risky fixed income securities, such as bonds.
Vanguard To Launch Target Retirement 2070 2015 Vintage Retiring
Vanguard today announced plans to launch Vanguard Target Retirement 2070 Fund and Vanguard Target Retirement 2070 Trusts. The newest vintage in Vanguard’s industry-leading Target Retirement lineups, 2070 is designed to provide the youngest members of the workforce with an all-in-one, low-cost portfolio option as they begin saving for retirement.1
“Vanguard Target Retirement sets a solid foundation for young investors as they begin their retirement journey by providing a broadly diversified, professionally managed, indexed-based investment portfolio that encourages long-term discipline and seeks to deliver risk-adjusted returns over time,” said John James, managing director and head of Vanguard Institutional Investor Group.
The 2070 vintage is designed for younger investors whose long time horizons may enable them to withstand equity market risk and benefit from decades of potential growth and compounding. Informed by more than four decades of investment management expertise and behavioral research, Vanguard Target Retirement’s glidepath begins with a significant equity allocation . Over time, as an investor approaches retirement, the glidepath incrementally decreases exposure to equities and increases exposure to fixed-income investments. The portfolio reaches its most conservative allocation seven years after retirement . Vanguard Target Retirement 2070 Fund and Vanguard Target Retirement 2070 Trusts will launch by mid-2022 with the following asset allocation:
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Vanguard To Add Target Retirement 2065 Fund For The Youngest Millennial Investors
VALLEY FORGE, PA Vanguard is expanding its industry-leading target-date series with a new option designed for the next generation of investors.1 Vanguard Target Retirement 2065 Fund will provide the youngest millennial investors with a low-cost, fully-diversified option to begin saving for retirement as they enter the workforce.
Vanguard Target Retirement Funds provide a professionally-managed portfolio comprising broadly-diversified, low-cost Vanguard index funds that offer diversification, inflation protection, risk control, and growth potential. Vanguard investment experts combine both behavioral research and capital markets data to create a glide path strategy that automatically rebalances risk within the portfolio as an investor gets closer to retirement by incrementally decreasing exposure to equities and increasing exposure to fixed-income investments.
Target-date strategies have grown dramatically from $116 billion to $763 billion in the past 10 years, particularly in the institutional defined contribution market.2
A leader in the DC market, Vanguard also serves as the largest provider of target-date funds with $449 billion assets under management.3 Vanguard estimates that $6 out of every $10 invested in target-date strategies in the U.S. goes to an index-based Vanguard TRF.4 More than 90% of Vanguards 5,900 DC plan sponsors offer TRFs, and nearly all of Vanguards more than 4 million participants have access to these funds.
About Vanguard
Dedication To Improving Retirement Outcomes
Vanguard’s unique investor-owned structure enables the firm to return value and pass on economies of scale to Target Retirement investors in the form of lower-costs, expanded access, and continued innovation of the series.3 As part of Vanguard’s commitment to further improving investors’ retirement outcomes, Vanguard announced a series of enhancements to its Target Retirement lineup and retirement income capabilities which are expected to result in $190 million in savings to Target Retirement investors.4
As part of these enhancements, Vanguard launched an additional retirement income solution for eligible defined contribution plans, Vanguard Target Retirement Income and Growth Trust. Designed as an opt-in alternative to Target Retirement Income, Target Retirement Income and Growth provides a higher equity allocation upon retirement and is designed for investors whose wealth, risk tolerance, and/or additional sources of income allow for a higher risk tolerance in retirement.
For more information about Vanguard’s Target Retirement lineup, please visit our website.
Notes:
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The Vanguard Target Retirement 2055 Fund
The Vanguard Target Retirement 2055 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 2030-2035 after that, it will start smoothly adjusting its allocation every year toward bonds.
The Vanguard Target Retirement 2055 Fund has an expense ratio of 0.15% 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 2053 and 2057.
Vanguard Target Retirement Funds
The Vanguard Target Retirement Funds offer one-stop shopping for those seeking a simple approach to retirement investments.
These funds:
- Have built-in diversificationby investing in major asset classes such as bonds, US stocks, international stocks, real estate, and commoditiesthat endeavor to manage risk and performance over time.
- Are managed to become more conservative as the fund get closer to your retirement date, gradually shifting the funds investments from higher-risk to lower-risk investments.
- Are managed by professionals, whose objectives are to manage your portfolio, with the goal of creating a mix of risk and return appropriate to each stage of your life.
- Are one of the lowest-fee target-date funds currently available.
The target-date funds are offered in five-year increments. You invest in a fund according to your current age, as follows:
| If You Were Born |
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Notes & Data Providers
Stocks: Real-time U.S. stock quotes reflect trades reported through Nasdaq only comprehensive quotes and volume reflect trading in all markets and are delayed at least 15 minutes. International stock quotes are delayed as per exchange requirements. Fundamental company data and analyst estimates provided by FactSet. Copyright © FactSet Research Systems Inc. All rights reserved. Source: FactSet
Indexes: Index quotes may be real-time or delayed as per exchange requirements refer to time stamps for information on any delays. Source: FactSet
Data on U.S. Overview page represent trading in all U.S. markets and updates until 8 p.m. See Closing Diaries table for 4 p.m. closing data. Sources: FactSet, Dow Jones
Stock Movers: Gainers, decliners and most actives market activity tables are a combination of NYSE, Nasdaq, NYSE American and NYSE Arca listings. Sources: FactSet, Dow Jones
ETF Movers: Includes ETFs & ETNs with volume of at least 50,000. Sources: FactSet, Dow Jones
Bonds: Bond quotes are updated in real-time. Sources: FactSet, Tullett Prebon
Currencies: Currency quotes are updated in real-time. Sources: FactSet, Tullett Prebon
Cryptocurrencies: Cryptocurrency quotes are updated in real-time. Sources: CoinDesk , Kraken
Calendars and Economy:Actual numbers are added to the table after economic reports are released. Source: Kantar Media
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Vanguard Introduces Two New Target Retirement Funds
15 November 2017 | News from Vanguard
Toronto, November 1, 2017 Vanguard Investments Canada Inc. today announced its low-cost Target Retirement 2060 and 2065 Pooled Funds are now available to qualified Canadian institutional investors, including plan sponsors.
Vanguard now offers a total of 12 target-date funds in Canada, ranging in retirement years 2015 to 2065, in five-year increments. These target retirement funds, which invest in indexed pooled funds, gradually and automatically shift to a more conservative asset allocation as the target date draws near.
Plan sponsors and institutional clients are looking for broad-based and low-cost investment strategies to serve the needs of plan participants, including younger investors, said Jason McIntyre, head of distribution for Vanguard Investments Canada Inc. These funds provide age-appropriate asset allocation in a simple yet sophisticated and low-cost solution for retirement investing.
Vanguard Target Retirement Fund initial asset allocations
| 70% |
A global leader in target-date funds
In addition to 12 Target Retirement Funds, Vanguard offers 33 ETFs in Canada.
About Vanguard
For more information, please contact:Matt Gierasimczuk
*Source: Morningstar
Important Information
In this material, references to Vanguard are provided for convenience only and may refer to, where applicable, only The Vanguard Group, Inc., and/or may include its affiliates, including Vanguard Investments Canada Inc.
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Which Target Retirement Fund Fits Your Timeline
Use our table to find the fund that best fits you.
Fund name
*Vanguard Target Retirement Funds average expense ratio: 0.12%. Industry average expense ratio for comparable target-date funds: 0.55%. All averages are asset-weighted. Industry averages exclude Vanguard. Sources: Vanguard and Morningstar, Inc., as of December 31, 2020.
Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date.
These fund suggestions are based on an estimated retirement age of approximately 65. Should you choose to retire significantly earlier or later, you may want to consider a fund with an asset allocation more appropriate to your particular situation.
All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Investments in bonds are subject to interest rate, credit, and inflation risk.
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The Vanguard Target Retirement 2025 Fund
The Vanguard Target Retirement 2025 Fund has a target date that ranges from 2021 to 2025. 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 36.30% allocation to domestic stocks, a 24.20% allocation to international stocks, a 27.70% allocation to U.S. corporate and Treasury bonds, and an 11.80% 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 2025 Fund, and Vanguard target-date funds, in general, tend to focus more on higher-quality bonds and Treasury inflation-protected securities compared to other fund families. This approach provides better protection of capital against volatility and real value erosion.
The Vanguard Target Retirement 2025 Fund has a four-star rating from Morningstar and an expense ratio of 0.13%. As the fund gets close to 2025, 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 2023 and 2027.
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A Portfolio That Adjusts As Participants Careers Progress
At Voya, our glide path relative to peers has a higher equity allocation for younger participants to build wealth and a lower equity allocation for participants near and in retirement to reduce risk in those critical years. Younger participants can afford to take on more investment risk in exchange for greater potential returns. However, in the later years, participants are more vulnerable to a market downturn, particularly the day they retire.
The Fund may periodically deviate from the Target Allocation, generally withing the range of +/- 10% relative to the current Target Allocation. The sub-adviser may determine to deviate by a wider margin in order to protect the Fund, achieve its investment objective or to take advantage of particular opportunities. This chart is for illustrative purposes only and may not reflect the current allocations of the Voya Target Retirement Fund Series. This illustration is intended to show how the Voya Target Retirement Fund Series transitions over time.
The Vanguard Target Retirement 2040 Fund
The Vanguard Target Retirement 2040 Fund offers a one-stop broadly diversified portfolio with a target date between 2038 and 2042. 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 50.20% of the funds 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 4.80% 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 2040 Fund has an expense ratio of 0.14% and it has a four-star rating from Morningstar. Due to Vanguards larger emphasis on international bonds and international equities, the fund provides broader diversification and better return prospects in the long run, as overseas marketsespecially emerging marketstend to grow faster compared to developed markets.
The Vanguard Target Retirement 2040 Fund is most appropriate for investors whose target retirement is between 2038 and 2042 and would like to invest in one fund and not have to worry about rebalancing until their retirement.
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Vanguard Target Retirement 2015 Fund Merged Into Vanguard Target Retirement Income Fund
Vanguard has notified Nationwide of the merger of the Vanguard Target Retirement 2015 Fund into the Vanguard Target Retirement Income Fund . The effective date of this merger was July 8, 2022. On that date, all shares held in the Vanguard Target Retirement 2015 Fund were converted into shares of the Vanguard Target Retirement Income Fund. Investment elections to the closing fund for future contributions and other purchases were also redirected to the Vanguard Target Retirement Income Fund.
This action is expected. The Vanguard Target Retirement Funds continue on their glidepath for seven years past the target date reflected in the funds name, at which point the glidepath investment allocation of the Target Retirement Fund coincides with the investment allocation of the Income Fund. Because of this, the underlying investments remain largely consistent. Note also that the expense ratio for both funds is 0.08% annually.
No action is required of participants invested in the Vanguard Target Retirement 2015 Fund. The actions described above occurred automatically on July 8, 2022. Participants will see this activity reflected in their online account and on their 3rd Quarter 2022 participant account statements issued in October.
Best Vanguard Target Retirement Funds
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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 dont have to. They start with an allocation favoring stocks in the early years of an investors 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 0.10%. The industry average expense ratio for comparable target-date funds is 0.60%. Beginning in February 2015, Vanguard increased the international equity and fixed income allocations for its target-date funds to provide investors with improved global diversification.
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