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Vanguard Target Retirement Funds Review


Best Vanguard Funds for IRA: Target Retirement 2025 (VTTVX), Target Retirement 2030 (VTHRX), Target Retirement 2035 (VTTHX), Target Retirement 2040 (VFORX), Target Retirement 2045 (VTIVX), and Target Retirement 2050 (VFIFX).



Vanguard Target Retirement Mutual Funds


Vanguard Target Retirement Funds offer a diversified portfolio within a single fund that adjusts its underlying asset mix over time. The funds provide broad diversification while incrementally decreasing exposure to equities and increasing exposure to bonds as each fund’s target retirement date approaches.


Vanguard Target Retirement 2025 Fund, Investor Shares (VTTVX)


Vanguard's Target Retirement 2025 fund is geared for investors planning to retire in approximately 2025. The 2025 fund holds a mix of 70% equities and 30% bonds and obtains this asset mix by investing in four Vanguard Index funds. The portfolio will be gradually rebalanced toward a higher mix of bonds as the target date approaches. This makes the portfolio more conservative as retirement nears, which mirrors the strategy many advisors urge their clients to adopt. The asset mix for the target date and beyond will be 30% stocks and 70% bonds.

The four index funds used in the 2025 fund are Vanguard's Total Stock Market Index Fund Investor Shares (VTSMX), Total International Stock Index Fund Investor Shares (VGTSX), Total Bond Market II Index Fund Institutional Shares (VTBNX), and Total International Bond Index Fund Investor Shares (VTIBX). The domestic/ international mix is about 63% domestic and 37% international, which gives the 2025 fund additional diversification.

The risk level for the 2025 fund is three on Vanguard's one-to-five scale, which puts the fund in the moderate risk category. It has earned a four-star rating from Morningstar. Its expense ratio is 0.17%, which is less than half the average expense ratio of its peer group. The 2025 fund's 10-year annualized return is 5.41% compared with 5.52% for its benchmark index.


Vanguard target funds reviews



Vanguard Target Retirement 2030 Fund, Investor Shares (VTHRX)


Vanguard's Target Retirement 2030 fund is geared for investors planning to retire in about 2030. With a longer time horizon than the 2025 fund, the 2030 fund incorporates slightly more risk into its portfolio. Its asset mix is currently about 80% equities and 20% bonds. The fund managers will gradually reduce equity exposure through rebalancing until 2030. The asset mix for the target date and beyond will be 30% stocks and 70% bonds.

The four Vanguard Index funds that make up the portfolio are the Total Stock Market Index Fund Investor Shares (VTSMX), Total International Stock Index Fund Investor Shares (VGTSX), Total Bond Market II Index Fund Institutional Shares (VTBNX), and Total International Bond Index Fund Investor Shares (VTIBX). Allocation is about 63% domestic and 37% international, similar to the 2025 fund.

Volatility will be a bit greater with an asset mix of 80/20 in favor of equities, so Vanguard has assigned the 2030 fund a risk potential rating of four on a scale of one-to-five, which means the potential risk and reward are both greater than average. It has earned a four-star rating from Morningstar. Its expense ratio is 0.17%, which is only one-third of the average expense ratio of its peer group. Being relatively new, the 2030 fund's longest measuring period for total return comparisons is only five years. Its 5-year annualized return is 8.61% compared with its benchmark index's 8.82% return.


Vanguard target funds



Vanguard Target Retirement 2035 Fund, Investor Shares (VTTHX)


Vanguard's Target Retirement 2035 fund is geared for investors planning to retire in about 2035. It diversifies by owning four different Vanguard Index funds that include stocks and bonds, both domestic and international. Since this fund has a 20-year time horizon, the current asset mix is 85% equities and 15% bonds. The asset mix for the target date and beyond will be 30% stocks and 70% bonds.

The four Vanguard Index funds that make up the portfolio are the Total Stock Market Index Fund Investor Shares (VTSMX), Total International Stock Index Fund Investor Shares (VGTSX), Total Bond Market II Index Fund Institutional Shares (VTBNX), and Total International Bond Index Fund Investor Shares (VTIBX). Allocation is about 63% domestic and 37% international.

Volatility will be greater with an asset mix of 85/15 in favor of equities, so Vanguard has assigned a risk potential rating of four on a scale of one-to-five, which means the potential risk and reward are both greater than average. It has earned a four-star rating from Morningstar. Its expense ratio is 0.18%, which is less than half the average expense ratio of its peer group. Its 10-year annualized return is 5.56% compared with its benchmark index's 5.68% return.





Vanguard Target Retirement 2040 Fund, Investor Shares (VFORX)


Vanguard's Target Retirement 2040 fund emphasizes long-term growth with a small mix of income from bonds in its portfolio. Currently with a target allocation of 90% equities and 10% bonds, the 2040 fund is designed for younger investors who are targeting their retirement in approximately 2040.

The four Vanguard Index funds that make up the portfolio are the Total Stock Market Index Fund Investor Shares (VTSMX), Total International Stock Index Fund Investor Shares (VGTSX), Total Bond Market II Index Fund Institutional Shares (VTBNX), and Total International Bond Index Fund Investor Shares (VTIBX). Allocations in each fund are adjusted periodically to reduce equity exposure and increase bond holdings as the target date nears. The asset mix for the target date and beyond will be 30% stocks and 70% bonds.

The current domestic/international portfolio mix is about 61% domestic securities and 39% international securities. Investors should expect the domestic part of the portfolio to increase gradually as the target date of 2040 approaches. The fund has been assigned a risk potential rating of four out of five based on Vanguard's risk/reward criteria.

The 2040 fund's expense ratio of 0.18% is almost two-thirds lower than the average expense ratio of its peer group. It has earned a four-star rating from Morningstar. Being relatively new, the 2040 fund's longest measuring period for total return comparisons is only five years. Its 5-year annualized return is 9.18% compared with 9.43% for its benchmark index.


Vanguard target retirement funds review



Vanguard Target Retirement 2045 Fund, Investor Shares (VTIVX)


Vanguard's Target Retirement 2045 fund is similar to the Vanguard 2040 fund in that it holds a portfolio of four Vanguard Index funds that offer a combined asset mix of 90% equities and 10% bonds. It is designed for younger investors who expect to retire sometime around the 2045. These investors should be willing to take above-average risk with their investment portfolio with the goal of superior long-term returns.

The four Vanguard Index funds that make up the portfolio are the Total Stock Market Index Fund Investor Shares (VTSMX), Total International Stock Index Fund Investor Shares (VGTSX), Total Bond Market II Index Fund Institutional Shares (VTBNX), and Total International Bond Index Fund Investor Shares (VTIBX). Allocations in each fund are periodically adjusted to reduce equity exposure and increase bond holdings as the target date nears. The asset mix for the target date and beyond will be 30% stocks and 70% bonds.

The current domestic/international portfolio mix is about 61% domestic securities and 39% international securities. Investors should expect the domestic part of the portfolio to increase gradually as the target date of 2045 approaches. The fund has been assigned a risk potential rating of four out of five based on Vanguard's risk/reward criteria. The 2045 fund's expense ratio of 0.18% is much less than half the average expense ratio of its peer group. It has earned a four-star rating from Morningstar. The 2045 fund's 10-year annualized return is 5.73% compared with 5.85% for its benchmark index.





Vanguard Target Retirement 2050 Fund, Investor Shares (VFIFX)


Vanguard's Target Retirement 2050 fund is a diversified fund of funds that is designed for long-term growth through a high concentration of equities with a small percentage of bonds to offset a portion of the stock market's inherent volatility.

The four Vanguard Index funds that make up the portfolio are the Total Stock Market Index Fund Investor Shares (VTSMX), Total International Stock Index Fund Investor Shares (VGTSX), Total Bond Market II Index Fund Institutional Shares (VTBNX), and Total International Bond Index Fund Investor Shares (VTIBX). Allocations in each fund are periodically adjusted to reduce equity exposure and increase bond holdings as the target date nears. The asset mix for the target date and beyond will be 30% stocks and 70% bonds.

The current domestic/international portfolio mix is about 61% domestic securities and 39% international securities. Investors should expect the domestic part of the portfolio to increase gradually as the target date of 2050 approaches. The fund has been assigned a risk potential rating of four out of five based on Vanguard's risk/reward criteria.

The 2050 fund's expense ratio of 0.18% is almost two-thirds lower than the average expense ratio of its peer group. It has earned a four-star rating from Morningstar. Being relatively new, the 2050 fund's longest measuring period for total return comparisons is only five years. Its 5-year annualized return is 9.18% compared with 9.42% for its benchmark index.


Vanguard target funds review