Vanguard Changes Target Retirement Fund Offerings

I’ve been meaning to write something about this for quite awhile, but I never got around to it. Anyway… This past June, Vanguard introduced another set of their Target Retirement Funds, which are asset allocation funds based on an underlying set of low-cost Vanguard index funds. Previously, they had a series of ‘mid-decade’ funds spaced every ten years for those planning to retire around 2015, 2025, 2035, and 2045. But they didn’t have anything for those in between.

Because I’m slated to hit retirement age a bit after 2035, and because I didn’t think that their funds were aggressive enough for my taste, I responded by mixing the Target Retirement 2035 and 2045 funds to achieve my proper investment mix. With the new funds, however, they have options for those retiring in 2010, 2020, 2030, 2040, and 2050.

On top of this, they changed up the investment mix such that the various Target Retirement Funds are now considerably more aggressive. Indeed, for all funds with a 25+ year time horizon (i.e., 2035 and beyond), there is now a maximum of 10% bond exposure, meaning that all of these longer term funds look almost identical right now. The only difference is that they’ll start ratcheting back their aggressiveness at different points in time (for the 2035, this will happen in 2010).

For the sake of comparison, the bond exposure was a bit over 24% bonds in the 2035 option and 12% in the 2045 option when I last wrote about these funds. But now that the various longer-term options are virtually identical, I no longer see a need to split our funds into more than one. We will, of course, have to revisit this in 2010 when the 2035 fund starts ratcheting down the equity portion of our portfolio.