Target-date funds

Choosing a target-date provider is one of the most important decisions for plan sponsors. Discover how Vanguard Target Retirement Funds and Trusts can help bring financial well-being for participants and fiduciary well-being for you.

  • Outcome focused. Industry leading.
  • Leading participants to and through retirement.
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Outcome focused. Industry leading.

10-year risk/return: Risk/return scatter diagram showing that Vanguard Target Retirement Income Fund and Vanguard Target Retirement 2050 Fund outperformed their Morningstar peer-group averages with less volatility for the 10-year period through June 30, 2024. Vanguard Target Retirement Income Fund provided an annualized return of approximately 4% with a standard deviation of approximately 6% compared to its peer-group average that provided an annualized return of approximately 3.9% with a standard deviation of approximately 7%; Vanguard Target Retirement 2050 Fund provided an annualized return of approximately 8% with a standard deviation of approximately 13% compared to its peer-group average that provided an annualized return of approximately 7% with a standard deviation of approximately 13.5%.

Balancing risk and return

Our target-date funds (TDFs) have historically provided higher returns with less volatility than their peer averages. That means more retirement confidence for participants and more fiduciary confidence for you. And that’s a win for everyone.

Sources: Vanguard and Morningstar, Inc., as of June 30, 2024. Results will vary for other time periods. Vanguard’s oldest share class (Investor Shares) and all funds in the Morningstar peer group with a minimum 10-year history were included in the comparison. There may be other material differences between products that must be considered before investing. Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. Investment returns and principal value will fluctuate, so investors' shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For the most recent performance, visit our website at vanguard.com/performance.

Standardized performance
Vanguard Target Retirement Income Fund 
Vanguard Target Retirement 2050 Fund

 

Bar chart comparing the performance of Vanguard Target Retirement Income Fund with its Morningstar peer average during four notable market downtowns: the global financial crisis in October 2007 through March 2009, with returns of -12.1% for the Vanguard fund versus -18.1% for the peer average; the U.S. credit downgrade in July through August 2011, with returns of -3.4% versus -4.8%; the -global equity market sell-off in September through December 2018, with returns of -4.6% versus -5.0%; and the start of the COVID-19 pandemic in February through March 2020, with returns of -12.4% versus -13.7%. Sources: Vanguard and Morningstar.

Weathering tough times

Extreme market volatility is the last thing anyone wants to deal with when they're trying to preserve retirement savings. Our Target Retirement Income Fund (the vintage for those already in retirement when they need the funds the most) performed strongly against its peer-group average during not one but four severe market downturns since it was introduced in 2003. So your participants can remain optimistic when the market forecast is anything but sunny.

Hypothetical growth of $100K: Line chart showing the hypothetical growth of $100,000 in Vanguard Target Retirement 2020 Fund versus the Morningstar peer-group average for the period July 1, 2006, through June 30, 2024. The final balance in the Vanguard fund is $579,741 compared with $539,581 for the peer-group average―a difference of $41,160 more for the Vanguard investment. Sources: Vanguard and Morningstar as of June 30, 2024.

Optimizing outcomes

We designed our TDFs based on our decades of portfolio management expertise and time-tested investment techniques. As a result, our TDFs, on average, have performed in the top quartile among their peer groups for 10-year returns,1 giving participants a better chance for lasting income through retirement.

Note: This hypothetical illustration assumes an investor with a $100,000 balance in a defined contribution plan contributing 10% of an $80,000 salary that increases 2% each year.

1 Vanguard and Morningstar, Inc., as of June 30, 2024. Our Target Retirement Funds with a 10-year track record or longer (2060 and earlier vintages), on average, ranked in the 77th percentile among peer groups for 10-year returns through 2024. Vanguard Target Retirement Income Fund ranked 29th out of 104 peers; 2020 Fund, 23rd out of 94; 2025 Fund, 17th out of 144; 2030 Fund, 28th out of 138; 2035 Fund, 46th out of 140; 2040 Fund, 51st out of 138; 2045 Fund, 42nd out of 140; 2050 Fund, 39th out of 138; 2055 Fund, 47th out of 134; and 2060 Fund, 6th out of 15. Only competing funds with a 10-year history were included. Results will vary in other time periods.

Standardized performance
Vanguard Target Retirement 2020 Inv

Leading participants to and through retirement.

We blend investment theory with four decades of behavioral insights to design a TDF glide path that helps participants retire when they want, with enough money to live comfortably. It presents your participants with a carefully calibrated balance between risk and reward that may look simple on the surface but is backed by decades of research. This thoughtful approach allows our TDFs to more fully support income throughout a participant’s retirement. 

Learn more about our retirement income strategies 

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  • phase 1, early career. Given their long investment horizon, younger investors can likely afford to take more risks with a 90% stock allocation, which captures growth but is diversified with just enough bonds to temper the worst downturns. ](null)

    Chart depicting various glide paths in relation to different investment phases along the x-axis and asset allocation along the y-axis. The thicker line represents Vanguard’s optimal TDF glide path, where allocation to stocks is highest during the early stages of investment. Stock allocation gradually decreases to the right, while exposure to U.S. and international bonds, as well as short-term TIPS, gradually increases as the investor moves into later phases of investing.

  • phase 1, early career. Given their long investment horizon, younger investors can likely afford to take more risks with a 90% stock allocation, which captures growth but is diversified with just enough bonds to temper the worst downturns. ](null)

    Age 20: phase 1, early career. Given their long investment horizon, younger investors can likely afford to take more risks with a 90% stock allocation, which captures growth but is diversified with just enough bonds to temper the worst downturns. Portfolio distribution is composed of 54% U.S. stocks, 36% international stocks, 7% U.S. nominal bonds, 3% hedged international bonds, and 0% short-term TIPS.

  • phase 2, transition. We start to gradually reduce stock exposure to build a more conservative portfolio in preparation for retirement. 

    Age 40: phase 2, transition. We start to gradually reduce stock exposure to build a more conservative portfolio in preparation for retirement. Portfolio distribution is composed of 54% U.S. stocks, 36% international stocks, 7% U.S. nominal bonds, 3% hedged international bonds, and 0% short-term TIPS

  • phase 2, transition. We begin to allocate assets to short-term Treasury Inflation-Protected Securities, further reducing volatility while providing inflation protection. Learn more

    Age 60: phase 2, transition. We begin to allocate assets to short-term Treasury Inflation-Protected Securities, further reducing volatility while providing inflation protection. Portfolio distribution is composed of 36% U.S. stocks, 24% international stocks, 28% U.S. nominal bonds, 12% hedged international bonds, and 0% short-term TIPS.
  • Age 65: phase 3, retirement. Trust investors have the choice to remain on the default glide path or freeze their 50% equity allocation by converting to Vanguard Target Retirement Income and Growth Trust. Portfolio distribution is composed of 30% U.S. stocks, 20% international stocks, 29.4% U.S. nominal bonds,12.6% hedged international bonds, and 8% short-term TIPS.

  • phase 4, withdrawal. Our research shows 72 is the most common age to start withdrawals. This age is when our default glide path reaches its final asset allocation at 30% stocks and 70% bonds, transitioning to the Target Retirement Income strategy. This strategy is just one part of our holistic retirement income offer to support your participants through their retirement journey. Learn more

    Age 72: phase 4, withdrawal. Our research shows that 72 is the most common age to start withdrawals. This age is when our default glide path reaches its final asset allocation at 30% stocks and 70% bonds, transitioning to the Target Retirement Income strategy. Portfolio distribution is composed of 18% U.S. stocks, 12% international stocks, 37.24% U.S. nominal bonds,15.96% hedged international bonds, and 16.8% short-term TIPS.
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How America is saving with Vanguard Target Retirement Funds

November 13, 2024 | Investment

Vanguard’s target-date fund options are supported by time-tested research and an in-depth understanding of real-world participant behaviors.

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Redefining value.

The way we're built helps us to return value to investors. But our definition of value goes beyond simply lowering costs. We're continually enhancing products and services at pricing that disrupts the industry to help deliver the best participant outcomes—and we have a track record spanning nearly five decades to prove it. 

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Investor-centric structure

Our investors own Vanguard,¹ so our business model helps us to prioritize financial well-being for participants and fiduciary well-being for sponsors. This investor ownership has enabled us to gain tremendous scale, with more than 15 million investors entrusting us with $1 trillion in TDF assets, more than the assets invested in any other TDF franchise.² This has allowed us to further reduce costs to benefit participants.

¹ Vanguard is owned by its funds, which are owned by Vanguard’s fund shareholder clients.

² TDF assets are based on data from Vanguard, Morningstar, and company public filings, as of June 30, 2024.

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Lower costs

We have a long history of lowering costs and returning value to our investor-owners and fiduciaries. This isn't a short-term competitive ploy or marketing gimmick. It's a core value, and it leads to something we’re proud to call the Vanguard Effect®: In every market we enter, competing firms lower their costs.

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Enhanced services

We also return value to investors by improving our products and services. Our TDF participants have access to intuitive tools providing guidance and spending services in retirement, even if their plan is not recordkept at Vanguard. 

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Target-date funds FAQ

TDFs have been the go-to choice for qualified default investments in defined contribution plans for good reason. Learn more about them and how our Target Retirement strategies stand out from the rest.

  1. We’re investor owned. Fund shareholders own the funds that own Vanguard. We return value to our 50 million investors, 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 Vanguard and Morningstar, Inc., as of June 30, 2024. Our Target Retirement Funds with a 10-year track record or longer (2060 and earlier vintages), on average, ranked in the 77th percentile among peer groups for 10-year returns through 2024. Vanguard Target Retirement Income Fund ranked 29th out of 104 peers; 2020 Fund, 23rd out of 94; 2025 Fund, 17th out of 144; 2030 Fund, 28th out of 138; 2035 Fund, 46th out of 140; 2040 Fund, 51st out of 138; 2045 Fund, 42nd out of 140; 2050 Fund, 39th out of 138; 2055 Fund, 47th out of 134; and 2060 Fund, 6th out of 15. Only competing funds with a 10-year history were included. Results will vary in other time periods.

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 Fund—the fund in the series where you want the most protection against volatility—outperformed the Morningstar Target-Date Income Averages—not just for 2020, but during the past four steep downturns.

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 outcomes—reducing costs, delivering the expected asset allocation experience, and increasing investor wealth—over 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. 

Vanguard continually researches how TDFs can help plan sponsors offer the best path to retirement goals. The introduction of an actively managed TDF series is part of the discussion. We recognize many plan sponsors and participants have different risk tolerance levels and may prefer active management. Developing such a series would follow our philosophy and core mission.

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A TDF is a balanced mutual fund (or a collective investment trust in some cases for larger institutional plans) that has an aggressive asset allocation at the beginning and then automatically grows more conservative over time as a participant gets closer to their retirement year. It’s designed to maintain an appropriate asset mix for participants wherever they are in their investing lives.

A glide path is a formula determining the fund’s asset allocation, which grows more conservative as the fund approaches its target date. Glide paths from different TDF providers can vary considerably. For instance, the points at which the allocations change can be different. So can the speed at which the allocations change, the sub-asset classes included, and the mix of active and passive investments. Plan sponsors need to carefully consider how these different factors align to meet their participants’ needs.

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Disclosures and notes

For more information about any fund, visit institutional.vanguard.com or call 800-523-1036 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

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. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. 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 Trusts and Funds are subject to the risks of their underlying funds. The year in the trust or fund name refers to the approximate year (the target date) when an investor in the trust or fund would retire and leave the workforce. The trust or fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. The Income Trust/Fund and the Income and Growth Trust have fixed investment allocations and are designed for investors who are already retired. An investment in a Target Retirement Trust or Fund is not guaranteed at any time, including on or after the target date.

Vanguard is responsible only for selecting the underlying funds and periodically rebalancing the holdings of target-date investments. The asset allocations Vanguard has selected for the Target Retirement Funds are based on our investment experience and are geared to the average investor. Regularly check the asset mix of the option you choose to ensure it is appropriate for your current situation.

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.

Investments in bonds are subject to interest rate, credit, and inflation risk. While U.S. Treasury or government agency securities provide substantial protection against credit risk, they do not protect investors against price changes due to changing interest rates. Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest. Investments in stocks or bonds issued by non-U.S. companies are subject to risks, including country/regional risk and currency risk.