Vanguard Target Retirement Income Investment


How Did Vanguard’s Tdfs Perform During 2020’s Market Volatility

Vanguard Target Retirement Fund | Best Investment Decision

They performed better than peer averages. An integral part of our TDF design is to deliver strong performance while limiting volatility during market drops. For instance, Vanguard Target Retirement Income Fundthe fund in the series where you want the most protection against volatilityoutperformed the Morningstar Target-Date Income Averages not just for 2020, but during the past four steep downturns.

What Distinguishes Vanguards Tdfs From The Competition

1. Were investor owned. Fund shareholders own the funds that own Vanguard, removing the conflict of interest when reporting to another party. We return value to our 30 million owners, not to an outside firm.

2. We designed our TDFs to help the greatest number of participants successfully reach their retirement goals. Our glide path optimizes asset allocation to balance risk and reward along their journey.

3. Vanguard Target Retirement Funds on average have performed in the top quartile among their peer group for 10-year returns.3

3 Sources: Vanguard and Morningstar, Inc., as of 6/30/2022. Our Target Retirement Funds with a 10-year track record or longer , on average, ranked in the 78th percentile among peer groups for 10-year returns through mid-2022. Vanguard Target Retirement Income Fund ranked 29th out of 107 peers 2020 Fund, 19th out of 96 2025 Fund, 19th out of 129 2030 Fund, 26th out of 133 2035 Fund, 28th out of 124 2040 Fund, 20th out of 133 2045 Fund, 16th out of 123 2050 Fund, 20th out of 131 and 2055 Fund, 22nd out of 98. Only competing funds with a 10-year history were included. Results will vary in other time periods.

Why Is Vanguards Tdf Performance Wider Relative To Its Respective Composite Benchmarks

While index-based TDFs are constructed with index funds, they are not index funds themselves therefore, they are not managed like index funds. The benchmark implementation and rebalance policies for Vanguard Target Retirement Funds and Trusts seek to emphasize investor outcomesreducing costs, delivering the expected asset allocation experience, and increasing investor wealthover the optics of tightly tracking an uninvestable benchmark.

While other TDF strategies that rebalance monthly can give the appearance of tighter tracking to a benchmark, they also risk substantial variations from the target strategic asset allocation between rebalances. We rebalance our benchmark daily because we believe it provides the best representation of the glide path each day of the month.

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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: 0.11%. Industry average expense ratio for comparable target-date funds: 0.49%. All averages are asset-weighted. Industry averages exclude Vanguard. Sources: Vanguard and Morningstar, Inc., as of December 31, 2021.

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.

The Target Date Is Not The End

Review of Vanguard Target Retirement Funds

Nothing special happens with a Target Retirement Fund when it reaches its target date. The fund doesnt stop investing, and you dont 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.

About seven years after a fund reaches its target date, its investment mix is expected to match that of Vanguard Target Retirement Income Fund. That fund is designed to provide income to retirees while seeking to preserve the original investment.

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Vanguard Target Retirement Income Fund Overview

Vanguard Target Retirement Income Fund is an actively managed Allocation Target-Date Retirement fund. Vanguard launched the fund in 2003.

The investment seeks to provide current income and some capital appreciation. The fund invests in a mix of Vanguard mutual funds according to an asset allocation strategy designed for investors currently in retirement. Its indirect bond holdings are a diversified mix of short-, intermediate-, and long-term U.S. government, U.S. agency, and investment-grade U.S. corporate bonds inflation-protected public obligations issued by the U.S. Treasury mortgage-backed and asset-backed securities and government, agency, corporate, and securitized investment-grade foreign bonds issued in currencies other than the U.S. dollar.

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How The New Strategy Complements The Current Glide Path

The current glide path of our Target Retirement programs gradually decreases the portfolio’s equity allocation to 30% by age 72, when the assets transition to the existing Vanguard Target Retirement Income Trust. That allocation is well suited for those seeking a relatively stable inflation-adjusted income to cover basic living expenses.

But what if your plan has a subset of participants who might not fit the criteria above and want more than just to maintain their current lifestyle? These could be individuals who have a high net worth or can rely on other sources of income during retirement . They may have higher discretionary spending goals in retirement and the financial means and temperament to withstand periods of volatility in the equity markets.

The new Target Retirement Income and Growth Trust, with its higher 50% equity allocation, can serve this set of participants well. Those who are already invested in the Target Retirement Trusts and have the new trust as an option will be given the choice as they approach age 65 to opt in to the new strategy, which will freeze their equity allocation at 50%. If participants do nothing, or choose not to opt in, they will continue on the current glide path, eventually transitioning to the existing strategy with its 30% equity around age 72. The two Target Retirement strategies are identical in their expense ratio, underlying funds, and management approach the only divergence is the asset allocation after age 65.

Best Vanguard Target Retirement Funds

VANGUARD Target Retirement Funds – The BIG PROBLEM With Them!

Vanguard target-date funds do the research, selection, and rebalancing of securities so investors don’t have to. The funds start with an allocation that favors 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 favor of less risky securities, such as bonds and short-term reserves. Vanguard target retirement funds come with an average expense ratio of 0.08%. That’s 84% less than the industry average. Beginning in February 2015, Vanguard increased the international equity and fixed income allocations for its target retirement funds to provide investors with improved global diversification.

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Retirement Income Fund Vs Target Date Fund

Target-date funds are designed to make investing for retirement as simple as possible. Generally speaking, target-date funds are constructed around a planned future retirement date, which is most often included in the name of the fund, like the Vanguard Target Retirement 2060 Fund .

This objective defines the important differences between these two types of funds. First, target date funds designed for retirement 20 or more years from now typically have a 90% stock and 10% bond asset allocation. While this aggressive allocation is ideal for long-term investors, its not well suited for retirees.

Second, target date funds change their allocation as the target date approaches. These changes shift the allocation more towards fixed income to reduce the volatility of the portfolio as holders get closer to retirement. These changes in asset allocation are known as a funds glide path. Retirement income funds do not change the asset allocation over time.

Target date funds are designed to offer a single fund solution for retirement planning. These funds invest in domestic and international stocks and bonds in one fund. In contrast, retirement income funds are not necessarily designed to be a retirees sole investment choice. Some on our list might serve that purpose, such as the Wellington fund, but thats the exception, not the norm.

The author held no positions in the securities discussed in the post at the original time of publication.

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Ownership Makes A Difference

At Vanguard, youre more than just an investoryoure an owner. Our unique, investor-owned structure enables us to return value consistently to millions of investors.7

Since our founding in 1975, weve reduced expense ratios and lowered investment minimums for investors more than 2,000 times across asset classes, product types, and strategies. We have a long history of client-centric innovation and constantly evaluate ways to improve outcomes for target-date investors.

Vanguard Target Retirement investors continue to benefit from our ability to generate cost savings through economies of scale.

Vanguard Utilities Index Admiral Shares

Target Date Funds

This fund focuses on stocks in the utility sector, which tend to have high dividends. It mostly holds large-cap stocks of U.S. utility companies, such as Duke Energy Corporation and Southern Company .

The expense ratio for VUIAX is a low 0.10%. However, it is only offered in Vanguard’s “Admiral” share class, which has a minimum initial purchase of $100,000.

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Is The New Trust Right For Your Plan

The more participants you have who fall in the middle or to the right on any of the bars below, the more sense it makes to add the new strategy to your plan lineup. In other words, the more diverse your participant population, the better it is to include Vanguard Target Retirement Income and Growth Trust as an option to cover a broader range of participant retirement goals.

The new strategy can add value for your plan and participants, providing a greater degree of customization that can help meet the needs of a larger proportion of your employees and may better fulfill plan sponsors’ fiduciary responsibilitiesall at no additional cost to participants.

1 The new option is currently available only as a commingled investment trust, not as a 1940 Act mutual fund.2 Vanguard is the largest target-date fund manager in the industry, according to Morningstar data as of June 30, 2021.


What Is A Retirement Income Fund

A retirement income fund is a type of balanced fund that aims to generate income from stock dividends and/or bond interest. Most often, they are designed to be the terminal fund choice for people who have invested in a target-date fund.

Theres no single formula for retirement income funds. Included in our list are funds that range from allocating 100% bonds to as much as two-thirds to stocks. Some funds, such as the Wellington fund, could be used to manage a retirees entire investment portfolio. Others, such as the fixed income-focused choices on our list, are best used as component of a larger portfolio.

Typical retirement income funds put around two-thirds of their assets into fixed-income investments, with the balance in stocks. As part of the equity component, they generally offer exposure to non-U.S. assets, as well as Treasury Inflation-Protected Securities to hedge against inflation.

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The New Strategy Is Just Part Of Vanguard’s Multifaceted Retirement Income Approach

The addition of the new investment strategy rounds out our self-directed retirement income offer. When combined with our spending services and participant guidance tools, the two Target Retirement strategies provide a straightforward and flexible alternative to annuities. And for those who want more guidance, Vanguard offers a wide array of advice solutions for retirement income.

Vanguard’s multifaceted institutional retirement income offer provides customization to help participants achieve a broad range of financial goals while helping employers attract and retain talent. Greater retention can also translate to higher assets, which can provide scale and lower costs.

How Do Vanguard Target Retirement Funds Work

Vanguard Lifestrategy VS Target Retirement Funds | This is where Vanguard gets it wrong

Target-date funds are mutual funds that automatically rebalance the portfolio as the years go by to meet specific goals. Vanguard’s target retirement funds allow investors to put their funds in a single investment without having to worry about their balance of stocks and bonds. As the target retirement date approaches, Vanguard automatically shifts the ratio away from equity and toward fixed-income investments.

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Learn More About Target Retirement Funds

Informed by more than 4 decades of investment management expertise and behavioral research, the construction, management, and governance of Vanguard Target Retirement Funds represents Vanguards world-class thought leadership and investment capabilities. This family of funds is created in 5-year increments, with the 2070 fund being the newest in the lineup.

About Vanguard Target Retirement Income Fund

There are 2 members of the management team with an average tenure of 9.86 years: William Coleman , Walter Nejman . Management tenure is more important for actively managed funds than passive index funds.

The fund has 5 primary benchmarks: FTSE Global All Cap ex US TR USD index with a weighting of 12%, CRSP US Total Market TR USD index with a weighting of 18%, Bloomberg Gbl Agg xUSD Fl Aj RIC TR HUSD index with a weighting of 16%, Bloomberg US TIPS 0-5 Year TR USD index with a weighting of 16% and Bloomberg US Agg Float Adj TR USD index with a weighting of 37%. Vanguard Target Retirement Income Fund has 7 securities in its portfolio. The top 10 holdings constitute 98.9% of the funds assets. The fund meets the SEC requirement of being classified as a diversified fund. The fund is not considered to have an ESG focus with its investment selection and management.

Vanguard Target Retirement Income Fund is part of the Allocation global asset class and is within the Allocation fund group. Vanguard Target Retirement Income Fund has 30.1% of its portfolio invested in foreign issues. The overall assets allocated to domestic stock is 17.5%. There is 12.1% allocated to foreign stock, and 0.0% is allocated to preferred stocks. The bond allocation as a percentage of total assets is 66.9% . Vanguard Target Retirement Income Fund has 3.5% of the portfolio in cash.

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Are Target Retirement Funds Good Investments

Vanguard Target Retirement 2020 Fund (VTWNX)

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.

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How To Invest In A Target Retirement Fund

Think a Target Retirement Fund might be right for you? For more information, visit our Target Retirement Funds website. To find out if your retirement plan offers Target Retirement Funds and to change your investments, log on to your account at

All investing is subject to risk. 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. Diversification does not ensure a profit or protect against a loss in a declining market. Investments in bond funds are subject to interest rate, credit, and inflation risk.

For more information about any fund, including investment objectives, risks, charges, and expenses, call Vanguard at 800-523-1188 to obtain a prospectus. The prospectus contains this and other important information about the fund. Read and consider the prospectus information carefully before you invest. You can also download Vanguard fund prospectuses at

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