3 Vanguard Target-Date Retirement Funds

October 3, 2018 — 8:41 PM EDT

Vanguard offers target-date retirement funds to suit the needs of investors of various ages. A target-date fund is a mutual fund that automatically adjusts the asset mix and allocation over a time period that's based on your age and when you want to retire.

Vanguard's target-date retirement funds typically invest in other Vanguard index funds and provide investors with instant diversification. The company offers mutual funds for target retirement dates for every five years from 2020 to 2065. Here, we take a look at the company's funds for people who aim to retire in 2030, 2040 and 2050. Each of the funds invest the majority of their assets in Vanguard index funds, and each of their portfolios include Vanguard Total Stock Market Index Fund Investor Shares, Vanguard Total International Stock Index Fund Investor Shares, Vanguard Total Bond Market II Index Fund Investor Shares and Vanguard Total International Bond Index Fund Investor Shares. 

The information in this article was current as of Oct. 3, 2018. 

Vanguard Target Retirement 2030 Fund

The Vanguard Target Retirement 2030 Fund (VTHRX) is designed for investors who wish to retire between 2028 and 2032, and its minimum initial investment is $1,000. 

The fund was issued on June 7, 2006, and has achieved an average annual return of 6.78% since its inception. Its expense ratio is 0.14%, which is 69% lower than the average expense ratio of similar funds, according to Vanguard. The net assets of the fund are $35.70 billion, of which approximately 75% are held in stocks and 25% are held in bonds.

The Vanguard Target Retirement 2030 Fund is considered a moderate to aggressive fund. However, the allocation of assets in the fund will change as the target date approaches, and it will become more conservative over time. This makes the fund most suitable for people who want to invest in it for ten years or longer. 

Vanguard Target Retirement 2040 Fund

The Vanguard Target Retirement 2040 Fund (VFORX) is best suited for investors planning to retire between 2038 and 2042, and its minimum initial investment is $1,000.

The fund was issued on June 7, 2006, and has generated an average annual return of 7.28% since its inception. According to Vanguard, the fund's annual expense ratio, at 0.15%, is 65% lower than that of target-date funds with similar investments. The fund has $26.20 billion in net assets, of which of about 85% are held in stocks and 15% are held in bonds.

The Vanguard Target Retirement 2040 Fund is also considered a moderate to aggressive fund. However, as with the 2030 fund, the Vanguard Target Retirement 2040 Fund will become more conservative over time as the allocation of assets in the fund change. Similarly, this fund is also best for people who want to invest for ten years or more. 

Vanguard Target Retirement 2050 Fund

The Vanguard Target Retirement 2050 Fund (VFIFX) is for investors who will retire between 2048 and 2052, and its minimum initial investment is $1,000.

The fund has had an average annual return of 7.40% since its inception on June 6, 2006. Its expense ratio is 0.15%, which is 66% lower than that of funds with similar holdings, according to Vanguard. The fund's net assets total $16.60 billion, and about 90% of them are held in stocks and 10% are held in bonds.

Since the Vanguard Target Retirement 2050 Fund primarily invests in equities, or stocks, it carries a high degree of volatility and is considered aggressive. Therefore, it's best suited for investors who can tolerate the potentially high volatility of the stock market, as well as long-term investors. Like the other Vanguard target-date funds, this one will also become more conservative over time as the allocation of its assets change.