With an eye on the youngest retirement investors, Vanguard today announced plans to launch Vanguard Target Retirement 2070 Fund and Vanguard Target Retirement 2070 Trusts.
The newest vintage in Vanguard’s Target Retirement lineup, the 2070 Fund and Trusts are designed to provide the youngest members of the workforce with an all-in-one, low-cost portfolio solution as they begin saving for retirement, the company said in a statement today.
“Vanguard’s Target Retirement lineup sets a solid foundation for young investors as they begin their retirement journey by providing a broadly diversified, professionally managed, indexed-based investment portfolio that encourages long-term discipline and seeks to deliver risk-adjusted returns over time,” said John James, managing director and head of Vanguard Institutional Investor Group.
The 2070 option is designed for younger investors with long time horizons that enable them to withstand equity market risk and benefit from decades of potential growth and compounding.
Informed by more than four decades of investment management expertise and behavioral research, Vanguard Target Retirement’s glidepath begins with a significant equity allocation (90% stocks, 10% bonds). Over time, as an investor approaches retirement, the glidepath gradually reduces exposure to equities and increases exposure to fixed-income investments.
The portfolio reaches its most conservative allocation seven years after retirement (30% stocks, 70% bonds). Vanguard Target Retirement 2070 Fund and Vanguard Target Retirement 2070 Trusts will launch by mid-2022 with the following asset allocation:
U.S. stocks—54%
Foreign stocks—36%
U.S. fixed-income securities—7%
Foreign fixed-income securities—3%
Vanguard Target Retirement 2070 Fund will be available to individual investors with a $1,000 minimum initial investment. The fund’s investment minimum is waived for financial advisors, intermediaries, and for participants in a qualified retirement plan. The fund is expected to have an expense ratio of 0.08%, representing one-fifth the cost of the average target-date fund.
Vanguard Target Retirement 2015 to retire
Vanguard also announced today that the 2015 vintage is approaching the end of its lifecycle with an asset allocation of 70% bonds and 30% stocks, mirroring the allocation of Vanguard Target Retirement Income, and will close to new investors on February 14, 2022.
To maximize portfolio management and cost efficiencies for shareholders, the firm plans to merge Vanguard Target Retirement 2015 Fund into Vanguard Target Retirement Income Fund and Vanguard Target Retirement 2015 Trusts into Vanguard Target Retirement Income Trusts. The mergers are anticipated to be completed in July 2022.
Improving retirement outcomes
The company credited its unique investor-owned structure for enabling it to consistently return value and pass on economies of scale to Target Retirement investors in the form of lower-costs, expanded access, and continued innovation.
In September 2021, Vanguard revealed a series of enhancments to its Target Retirement lineup and retirement income capabilities that are expected to result in an estimated $190 million in savings to Target Retirement investors.
As part of these enhancements, Vanguard launched an additional retirement income solution for eligible defined contribution plans, Vanguard Target Retirement Income and Growth Trust. Designed as an opt-in alternative to Target Retirement Income, Target Retirement Income and Growth provides a higher equity allocation upon retirement (50% stocks, 50% bonds) and is designed for investors whose wealth, risk tolerance, and/or additional sources of income allow for a higher risk tolerance in retirement.
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