Top Vanguard Funds for Retirement

May 06, 2023 By Triston Martin

The income that seniors get from Social Security may guarantee a minimum acceptable level of living, but having a retirement portfolio that is well-constructed and readily available may greatly improve the quality of your golden years. For investors to construct this portfolio before it is too late, they need to concentrate on increasing their contributions as much as possible, benefiting from any workplace plan matching, and staying the course.

Because the average lifespan in the United States has been gradually growing since 1969, investors have been forced to prepare for a considerably longer post-retirement life, which requires bigger investment portfolios. Withdrawals from a retirement portfolio need to cover not just the essential costs of living, such as food and shelter, but also purely optional spending, such as vacations, and essential costs, such as medical treatment. Below you will find the best Vanguard funds for retirement.

Vanguard Target Retirement 2060 Fund

Sean August suggests Vanguard Target Retirement funds as a solid retirement investment. August says these funds "invest in a range of securities, including stocks and bonds, and rebalance their holdings as the target date approaches." This approach, known as a "glidepath," aims to reduce portfolio volatility and drawdowns by increasing the bond and cash allocation.

Vanguard recommends VTTSX, an investment vehicle designed for investors aiming for a retirement date in 2060, to investors born between 1993 and 1997. Millennial investors were born between 1993 and 1997. The fund invests 54% of its assets in U.S. equities, 36.5% of its assets in foreign stocks, 6.8% of its assets in U.S. bonds, and 2.7% of its assets in international bonds. The fund is comprised of multiple other Vanguard index funds. VTTSX has an expense ratio of 0.08%, which translates to an annual fee of $8 for every $10,000 invested.

Vanguard Target Retirement 2025 Fund

For investors born between 1958 and 1962, the asset allocation of VTTSX is likely to be too aggressive and equities heavy for their risk tolerance. These individuals were born between 1958 and 1962. A Target Retirement Fund with a shorter time horizon, such as VTTVX, would be the best option in this scenario. This fund is designed for investors who are planning to retire by the year 2025, and as a result, its asset allocation is much more cautious.

VTTVX, much like VTTSX, uses several different Vanguard index funds as its underlying holdings. Currently, the fund comprises 23.3% foreign stocks, 33.3% U.S. bonds, and 12% international bonds. The majority of the fund's assets are located in the United States. Unlike VTTSX, VTTVX additionally has a 3.4% allocation to short-term Treasury Inflation-Protected Securities, abbreviated as TIPS. These securities protect against both increasing inflation and interest rates. In addition, the fund has an expense ratio that is 0.08%.

Vanguard LifeStrategy Conservative Growth Fund

The LifeStrategy fund lineup from Vanguard is an option for investors who would rather maintain a constant asset allocation. LifeStrategy funds, in contrast to the Target Retirement fund suite, adhere to a specified static asset allocation and do not change themselves over time. Therefore, an investor already retired with a good understanding of their tolerance for risk and the amount of income they require may find these investments suitable for them.

Paul Peeler, a financial consultant at Integrated Financial Group, thinks that VSCGX may be effective for investors who are okay with the potential volatility of an allocation of around 40% to stocks and 60% to bonds. A VSCGX allocation of 40% stocks and 60% bonds might be a good choice for those who are okay with the potential risk. Vanguard claims this product is ideal for investors who value current income but are also open to capital appreciation in the long run. VSCGX's fee structure averages 0.12%.

Vanguard LifeStrategy Income Fund

According to Peeler, "The LifeStrategy funds are an all-in-one solution," which means that once an investment has been placed, Vanguard is responsible for handling the quarterly rebalancing within its underlying index fund holdings. He says, "for retirees who are extremely wary of taking risks, a VASIX portfolio with 20% in equities and 80% in bonds might be more appropriate." VASIX is designed for investors who want to limit the amount of risk they take on associated with the stock market.

Vanguard Total Stock Market ETF

According to August, the financial advisor at our company, "Our firm prefers ETFs because they generally have lower fees than mutual funds, which makes them a cost-effective option for retirement investing." In addition, exchange-traded funds (ETFs) often have lower overall tax burdens than mutual funds do and facilitate intraday trading. August recommends VTI as an option for an exchange-traded fund (ETF), which may fulfill the role of a portfolio's primary broad-market U.S. equities position.

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