A target-date investment fund offers the simplicity of a complete portfolio in a single investment option.
Each target-date investment fund is comprised of a portfolio of five broadly diversified Vanguard index funds. As the year in a specific target-date fund’s name draws near, its investment mix becomes more conservative. That way, a single target-date investment is meant to serve you throughout both your career and retirement.
The year in the investment name is its target date, the approximate year in which an investor expects to retire and leave the workforce. A target-date investment will hold a higher proportion of stocks the further it is from its target date. To reduce risk as the target date approaches, the investment manager will gradually decrease its stock holdings and increase its bond holdings. Bonds usually have a lower risk of loss, though they also have lower potential gains than stocks. When the investment reaches its target date, you don’t need to take your money out. The gradual move from stocks to bonds simply continues. Target-date investments are designed to keep your money invested appropriately throughout your retirement years.
|If you were born in:||You could consider:*|
|1998 or later||Target-date 2065 investment|
|1993 to 1997||Target-date 2060 investment|
|1988 – 1992||Target-date 2055 investment|
|1983 to 1987||Target-date 2050 investment|
|1978 to 1982||Target-date 2045 investment|
|1973 to 1977||Target-date 2040 investment|
|1968 to 1972||Target-date 2035 investment|
|1963 to 1967||Target-date 2030 investment|
|1958 to 1962||Target-date 2025 investment|
|1953 to 1957||Target-date 2020 investment|
|1948 to 1952||Target-date 2015 investment|
|1947 or earlier||Income investment|
* Assumes an anticipated retirement age of 65.
You’re never locked into a particular investment. Maybe your tolerance for risk will change. Or you could decide to retire earlier or later. It’s a good idea to check your asset mix regularly to make sure it still matches your goals.
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Information provided by The Vanguard Group, Inc. © 2019 All rights reserved. Vanguard Marketing Corporation, Distributor of the Vanguard Funds.
All securities investments risk the loss of capital. Each Target Date Fund invests in U.S. Stocks, International Stocks, U.S. Nominal Bonds, International Nominal Bonds, and Short-term TIPS in different proportions. There is a chance of losing a percentage of your original investment. An investment in the fund could lose money over short or even long periods.
The stock market can be volatile. Over long periods of time investors with exposure to stocks may enjoy higher returns than other options. However, investors with exposure to stocks can also lose more money than in some other options. Sharp and unpredictable changes in value, either positive or negative, can be especially acute over shorter periods of time.
One of the main risks with bonds is interest rate risk, resulting in the chance that bond prices overall will decline because of rising interest rates. Because the bond portion of the Target Date Funds are passively managed index funds, returns will reflect the returns of the respective broad bond market. When the bond market rises, the bond portion will rise in tandem. Likewise, when the bond market declines (due to rising interest rates or other factors) the bond portion will decline as well. Investors can expect to receive returns of the respective general bond market, less applicable expenses. Although the bond market is perceived by many to be a more conservative type of investment—and historically, it has been less volatile—that does not mean that one cannot lose value in this fund.
Although all bonds in the bond portion of the Target Date Funds are considered to be “investment grade,” there is associated credit risk—the chance that a bond issuer will fail to pay interest and principal in a timely manner, or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline.
In addition, the bond portion of the Target Date Funds carries some “call” risk. This refers to the chance that during periods of falling interest rates, issuers of callable bonds may call (repay) securities with higher interest rates before their maturity dates. The bond portion of the Target Date Funds would then lose any price appreciation above the bond’s call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the fund’s income. For mortgage-backed securities, this risk is known as “prepayment risk.” Call/prepayment risk should be low for the fund because it invests mainly in securities that are not callable.
Because the underlying funds in the Target Date Funds are index funds, they have index sampling risk, which is the chance that the securities selected for the respective underlying fund, in the aggregate, will not provide investment performance matching that of the underlying fund’s target index. Index sampling risk for the fund should be low.
If you are uncomfortable with the risks associated with the Target Date Funds, you may want to consider another MMBB investment option.
Below is the performance of the Target Date Funds for varying lengths of time. The longer the time period, the more likely it encompasses varying economic and market conditions.
|Fund||1 Day||YTD||1 Year||3 Years||5 Years||10 Years|
|Vanguard Retirement Target Income Fund||0.80%||-5.62%|
|Vanguard Retirement Target 2020 Fund||1.26%||-12.31%|
|Vanguard Retirement Target 2025 Fund||1.54%||-13.38%|
|Vanguard Retirement Target 2030 Fund||1.69%||-14.57%|
|Vanguard Retirement Target 2035 Fund||1.89%||-16.27%|
|Vanguard Retirement Target 2040 Fund||2.05%||-17.95%|
|Vanguard Retirement Target 2045 Fund||2.26%||-23.12%|
|Vanguard Retirement Target 2050 Fund||2.26%||-21.41%|
|Vanguard Retirement Target 2055 Fund||2.25%||-20.80%|
|Vanguard Retirement Target 2060 Fund||2.25%||-20.75%|
|Vanguard Retirement Target 2065 Fund||2.25%||-20.91%|
The “YTD” performance for Vanguard Target Date funds is as of January 2, 2020, which is the funds’ inception date.
Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance is for the stated time period only; performance through the current date may be lower or higher than displayed above due to market fluctuations, manager performance or other reasons.
|Investment Management Fees||0.09%|
|MMBB Administrative Charge||0.50%|
|Total Estimated Annual Expenses||0.71%|
(1) *With all MMBB fund offerings, there are no sales charges on purchases, deferred sales charges, short-term or other redemption fees, distribution or 12b-1 fees, dealer commissions or low-balance account service fees.