Report : Investment | July 06, 2023

Base model or custom: Which TDF best suits your participants?

Previously published November 11, 2021

Read time: 2.5 minutes

Target-date funds (TDFs) and target-date trusts have been a convenient one-stop shop for helping to meet both participant retirement goals and plan sponsors' fiduciary responsibilities. Their value is widely accepted in the industry. As of year-end 2022, 96% of Vanguard-administered defined contribution (DC) plans offered TDF's and 83% of participants used TDFs.*

But can something good be made even better? That's a question plan sponsors often ask themselves when considering standard versus custom TDFs. Vanguard's latest research note, Custom Versus Off-the-Lot TDFs: Choosing the Right Vehicle for the Road to Retirement, covers the considerations in this decision. As the world's largest TDF provider** and one of the most trusted names in retirement investment solutions, Vanguard has the scale, experience, and expertise to provide a unique perspective.

The paper makes a comparison to car buying: In most cases, a base model can get you to your destination. But destinations vary and so can a plan's needs, circumstances, and demographics. The plan sponsor may also have preferences for a particular investment style, sub-asset class, or money manager. And that can warrant customization, possibly even building the retirement vehicle from the ground up.

When weighing whether to choose custom TDFs, plan sponsors need to consider the "three Cs":

*How America Saves 2023.

**Vanguard accounts for 37.5% of all AUM in target-date strategies across mutual funds and commingled funds, according to Morningstar data as of December 31, 2022.


  • All investing is subject to risk, including the possible loss of the money you invest. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
  • Investments in Target Retirement Funds and Trusts are subject to the risks of their underlying funds. The year in the fund or trust name refers to the approximate year (the target date) when an investor in the fund or trust would retire and leave the workforce. The fund/trust will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. The Income Trust/Fund and Income and Growth Trust have fixed investment allocations and are designed for investors who are already retired. An investment in a Target Retirement Fund or Trust is not guaranteed at any time, including on or after the target date.
  • Vanguard Target Retirement Trusts are not mutual funds. They are collective trusts available only to tax-qualified plans and their eligible participants. Investment objectives, risks, charges, expenses, and other important information should be considered carefully before investing. The collective trust mandates are managed by Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc.