At Vanguard, the end investor has always been at the heart of our TDF design. We believe the most successful investors are those who have a retirement portfolio that reflects their own circumstances and risk tolerances. We started by asking how we could best help investors save enough for retirement, while ensuring that they could keep more of their hard-earned money by continually lowering the cost of investing over time. Based on Vanguard research, retirement account balances among TDF users have steadily increased over the last 10 years.1
We’ve always taken a proactive approach to navigating the complexities that result from the ongoing evolution of retirement programs. We supported regulators as they made decisions related to the PPA and target-date adoption within QDIAs. When many plan sponsors were shifting from defined benefit to DC plans, we were there to communicate those complex scenarios: advocating for automatic solutions, such as default enrollment, automatic savings features, and the introduction of managed account advisory services to help reduce fiduciary concerns. Rather than trying to change the investors’ behavior, we focused on partnering with plan sponsors to enhance retirement plan design.
“When it comes to investing, straightforward and low costs have always been a tough combination to beat, and Vanguard’s target-date series sets the standard in both features. … This series is emblematic of Vanguard. It features low-cost, broadly diversified index funds to gain efficient exposure to global stocks and bonds. It’s devoid of any tactical shifts, and any changes to the glide path or asset allocation are well-vetted with a long-term mindset by the committee of senior Vanguard investors.” (Morningstar, 2023)5
We started the Vanguard Target Retirement Funds series because we believed they best captured market risk and returns at the lowest possible cost, helping to give investors the best chance of generating lasting retirement income. In partnership with our plan sponsors, we've made great progress in changing how people invest for retirement. The low-cost index funds used in Vanguard Target Retirement Funds can be easier for sponsors and participants to understand than those that combine active funds or other financial instruments and they may typically provide reduced exposure to market volatility and more consistent returns. As more plan sponsors have added TDFs, the index fund approach has grown in usage and adoption, which is a win for all investors. In part, federal laws like the PPA and other regulations have helped pave the way for greater usage of TDFs. Plan sponsors continue to display a strong preference for lower-cost target-date strategies4, which benefit all parties since they result in higher account balances for participants who invest with us. This is just one of the ways we help investors build enough wealth to increase the likelihood of their retirement success.