VALLEY FORGE, Pa.--(BUSINESS WIRE)--Vanguard is planning to introduce a new fund to its popular Target Retirement Funds in early 2012 and merge two funds with similar asset allocations. The series of low-cost, index-based funds will remain at 12, spanning the needs of generations of investors.
In early 2012, the Vanguard Target Retirement 2005 Fund will merge with the Vanguard Target Retirement Income Fund as their asset allocations become nearly identical. The Target Retirement Funds are designed to reach an allocation of 65% bonds, 30% stocks and 5% short-term reserves within seven years after their target date. The 2005 Fund will be closed to new investors, effective immediately.
Vanguard has also filed a registration statement with the U.S. Securities and Exchange Commission for the Vanguard Target Retirement 2060 Fund, which is aimed at investors who plan to retire and leave the workforce in or within a few years of 2060. At the time the fund is launched in early 2012, those investors will be 18 to 20 years old.
“The availability of a comprehensive lineup of Target Retirement Funds is important to our investors, particularly our retirement plan clients who want these funds available for every age group of their employee population,” said Vanguard CEO Bill McNabb. “The addition of the 2060 Fund meets the needs of young investors just entering the workforce. Understandably, they may not yet be thinking about retirement savings, but even setting aside a small amount now in a low-cost, balanced portfolio can make a big difference in their future financial security.”
Target-date fund usage has increased rapidly in the last several years, primarily through 401(k) defined contribution (DC) retirement plans and IRAs. Nearly 80% of plans recordkept at Vanguard offer Vanguard Target Retirement Funds, with almost 50% of participants in those plans investing in them. In addition, 14% of Vanguard IRA® investors hold Target Retirement Funds.
Vanguard is committed to keeping the Target Retirement Funds accessible to entry-level investors. In May, Vanguard reduced their minimum investment requirement from $3,000 to $1,000. The expense ratio of the 2060 Fund is expected to be 0.18%, similar to that of the other funds in the lineup. The average industry expense ratio for a target-date fund in the 2060 Fund's peer group is 0.60%, according to Lipper.
As with Vanguard’s existing Target Retirement Funds, the 2060 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. Asset allocations of the Target Retirement Funds become more conservative as they approach the target date.
Here is the expected initial asset allocation of the 2060 Fund:
| Underlying Fund | Initial Allocation | ||||||||||
| Vanguard Total Stock Market Index Fund | 63.0% | ||||||||||
| Vanguard Total Bond Market II Index Fund | 10.0% | ||||||||||
| Vanguard Total International Stock Index Fund | 27.0% | ||||||||||
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 work force. 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.
About Vanguard
Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies. Vanguard manages approximately $1.55 trillion in U.S. mutual fund assets, including more than $150 billion in ETF assets. Vanguard offers more than 170 index and actively managed funds to U.S. investors and more than 70 additional funds in non-U.S. markets. Vanguard provides investments to more than 8,500 defined contribution plans, including recordkeeping and investment services to more than 3.4 million participants in nearly 2,400 plans. Vanguard is also a major provider of investment, advisory, and recordkeeping services to defined benefit plans. For more information, please visit www.vanguard.com.
All Vanguard asset figures are as of September 30, 2011, unless otherwise noted.
Mutual funds are subject to risks, including possible loss of principal. Foreign investing involves additional risks including currency fluctuations and political uncertainty. Stocks of companies in emerging markets are generally more risky than stocks of companies in developed countries. Investments in bond funds are subject to interest rate, credit, and inflation risk. Diversification does not ensure a profit or protect against a loss in a declining market.
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.
For more information about Vanguard funds, visit www.vanguard.com, or call 800-662-7447, to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing. Copies of the final prospectus can be obtained from Vanguard. Please note that a preliminary prospectus is subject to change.
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