I’m Considering a Vanguard Target Retirement Fund—What Happens at the End?

Vanguard’s Target Retirement Funds are the perfect option for new retirees who just want to set and forget. For those who don’t want to worry about shifting their asset allocation in the face of increased stock and bond market turbulence (many retirees tend to be scared into loading up on bonds over stocks at the worst possible time — like after a market correction), while ensuring their fees are the lowest they could be, one could do very well by punching their ticket to a retirement solution offered by Vanguard — one of the gold standards in low-cost passive investing.

Indeed, shifting gears into retirement can be rather tricky. When are you supposed to up your bond exposure and trim from stocks? Is age the biggest determining factor? What if I’ve got a strong stomach in old age? 

Often, one may need a bit of help from a financial planning pro to help with asset allocation and all the sort as they manually “target” a retirement date. Though I’m a huge fan of advisors, the fact is that not every retiree can afford one. And for those with a good amount of knowledge and a knack for DIY, a Vanguard Target Retirement Fund may be good enough to get the job done as the product grows alongside the prospective retiree with time.

Vanguard retirement funds adapt and grow as you do.

As you’re probably aware by now, older investors should seek to take less stock market risk. As people get closer to their retirement date, asset allocation should start to shift away from stocks and towards bonds. Of course, gold and other assets may make sense as a part of a risk-off diversified portfolio as well, especially in a highly uncertain inflationary environment dragged down by tariff risks.

In any case, automating the transition is one of the main attractions of the Vanguard retirement funds. They’re incredibly solid options for the kinds of investors who want to be put on the right track without having to lose sleep over the state of markets. You could undoubtedly tune out after going with one of the funds. Whether you’re looking to retire in five years (a more conservative mix) or more than 45 years (a more aggressive mix), there’s a target retirement fund fit for just about everyone.

What’s at the end of the road for Vanguard retirement funds?

The Vanguard Target Retirement Income Fund (NASDAQ: VTINX), which currently yields 3.1%, is the final result for Vanguard Target Retirement funds once they reach “the end” of the road or one’s anticipated retirement date. It doesn’t matter if you’re in a target retirement 2070 fund or a 2030 one; all roads lead to the VTINX.

It’s a very conservative fund meant to be held throughout retirement, with a mere 0.08% worth of acquired fund fees and expenses, and a static mix of stocks and bonds (30% stocks and around 70% bonds). Of course, a 30/70 asset allocation may be a bit too conservative for some retirees.

Either way, it’s what all Vanguard target retirement funds eventually become, whether or not one desires to keep their foot a bit more on the growth pedal upon retiring. Of course, retirees can always sell and go for a 40/60 or 60/40 mix if 30% stocks don’t sit as well for them. And for those who aren’t satisfied with the 3% or so yield at the end of the road, one may wish to cash out and pursue other opportunities, perhaps with the helping hand of a retirement planning pro.

The bottom line

For most hands-off investors with limited knowledge on investments, the 30/70 mix offered by the VTINX (what all target retirement funds eventually become) is the right mix to sit with in retirement. It’s the lowest-risk option of the Vanguard basket and is designed to help retirees get the most out of retirement without having to take shortcuts or overpay for professional management.

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