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Out with 2010, in with 2065 for Target Retirement Funds

January 05, 2017

Vanguard announced today that in the summer of 2017, they will introduce a new fund to its Target Retirement Fund lineup. Additionally, they will merge two Target Retirement Funds with similar asset allocations. The number of low-cost, index-based funds throughout the series will remain at 12, spanning the needs of generations of investors.

Vanguard has filed a registration statement for the launch of Vanguard Target Retirement 2065 Fund, which will be aimed at investors who plan to retire and leave the workforce in or within a few years of 2065. At the time the fund is launched in 2017, those investors will be 18 to 22 years old.

While the addition of the 2065 Fund will seek to meet the needs of investors beginning the accumulation phase of their retirement savings, the Vanguard Target Retirement 2010 Fund is about to reach its predetermined final asset allocation. As a result, the 2010 Fund will be closed to new investors, effective January 5, 2017. In or around July 2017, the 2010 Fund will merge with the Vanguard Target Retirement Income Fund as their asset allocations become nearly identical. Target Retirement Funds are designed to reach an allocation of 70% bonds and 30% stocks within seven years after their target date.

"It's important for us to offer Target Retirement Funds for investors of all ages," Vanguard Chairman and CEO Bill McNabb said. "Getting an early start is incredibly important, and these funds make it easy for young investors to do just that."

"The 2065 Fund is designed with young investors in mind," said McNabb. "Granted, if you're just entering the workforce, you may not yet be thinking about retirement savings, but even setting aside a small amount today in a low-cost, balanced portfolio can make a big difference in your financial security down the road."

The expense ratio of the Target Retirement 2065 Fund is expected to be 0.16%, similar to that of the other funds in the lineup. The average industry expense ratio for a target-date fund in the 2065 Fund's peer group is 0.43% as of December 31, 2015, according to Lipper, a Thomson Reuters Company.

As with Vanguard's existing Target Retirement Funds, the 2065 Fund will invest in other low-cost broad-based Vanguard index funds to provide exposure to U.S. stocks and bonds, as well as developed and emerging market international stocks and bonds. Asset allocations of the Target Retirement Funds become more conservative the closer they get to their target dates. Here is the expected initial asset allocation of the 2065 Fund:

Underlying fundInitial allocation
Vanguard Total Stock Market Index Fund 54.0%
Vanguard Total Bond Market II Index Fund 7.0%
Vanguard Total International Stock Index Fund 36.0%
Vanguard Total International Bond Index Fund 3.0%

Notes:

  • Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date.
  • All investing is subject to risk, including possible loss of principal. 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.
  • A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
  • Copies of the final prospectus can be obtained from Vanguard. Please note that a preliminary prospectus is subject to change.
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