In this article, we will take a look at the 11 best Vanguard funds to buy for retirees. To see more such funds, go directly to 5 Best Vanguard Funds to Buy for Retirees.
As millions of Americans approach retirement age, retirement planning is taking on ever greater significance. Every year, a substantial number of Baby Boomers retire, and concurrently, millennials are becoming more engaged in considering their own retirement. After all, the main income source for the majority of individuals is their job. Unless they possess substantial inheritance, it's essential to commence retirement planning right from the outset of their professional journey. According to The Charles Schwab Corporation (NYSE:SCHW)'s Modern Wealth Survey, Americans now consider a minimum of $2.2 million as the threshold for wealth, surpassing the previous benchmark of $1 million. This same trend extends to retirement, where the target for a comfortable retirement has shifted from $1 million to $1.25 million over the years.
Throughout 2021, the economy grappled with the lingering effects of the COVID-19 pandemic. Despite efforts to bounce back, various notable challenges cast uncertainty over the recovery. Inflation surged to levels not witnessed for many years, supply-chain disruptions tempered economic expansion, and a constrained labor market posed ongoing challenges for employers, exacerbated by a record number of employees either transitioning to new roles or exiting the workforce altogether. Another result of the COVID-19 pandemic's emergence was the increasing popularity of retirement among Americans. According to a New York Times report, many millennial workers aspire to retire in their 50s to pursue their personal interests. However, their financial circumstances appear to tell a different story. The report cited findings from Willis Towers Watson's Global Benefits Attitudes Survey, indicating that 36% of millennial workers in a broad range of industries were saving a mere 5% of their income, a sum insufficient to cover their living expenses during retirement. However, 52% of the respondents said they expected to retire before 65. The 2022 TIAA Retirement Insights Survey echoed these sentiments, reporting that 31 percent of individuals aged 30 to 39 expressed above-average confidence in their retirement planning capabilities. Among the younger millennial cohort, aged 25 to 29, confidence was even higher, with 40 percent believing they had an above-average level of competence in retirement planning.
However, despite this confidence, several Americans are falling short in their savings efforts, and a significant portion is failing to contribute enough to their 401(k) plans to receive the full employer match. According to a recent survey conducted by the nonprofit Employee Benefit Research Institute, 64% of working individuals surveyed expressed confidence in their financial outlook for retirement. This represents a decrease from the 73% reported the previous year. Notably, only 18% of those surveyed expressed being "very confident" this year, down from the 30% reported in the previous year.
Vanguard's How American Saves 2022 report provides insight on how Americans are building their retirement savings. In recent years, automatic savings features have seen a significant surge in popularity. By the close of 2021, 56% of Vanguard plans had embraced automatic enrollment, a trend especially notable in plans with over 1,000 participants, where 75% had adopted this approach. Additionally, Americans are increasingly favoring professionally managed accounts and services as they plan for retirement. By the end of 2021, an impressive 64% of all Vanguard participants had placed their investments solely in automatic investment programs, marking a substantial increase from the 7% reported at the end of 2004. Vanguard presents a range of target-date retirement funds, some of which are featured in our list. These funds have been steadily gaining traction. According to a Vanguard report, 56% of their participants had invested in a single target-date fund. Reflecting their growing appeal, the availability of target-date funds in plans increased to 95% by the end of 2021, compared to 84% in 2012.
In spite of the aforementioned data, the United States boasts a thriving and robust retirement industry. According to McKinsey, the U.S. retirement market possesses an impressive $26 trillion in assets. This data unveils a remarkable forecast: by 2030, retirees are anticipated to make a greater contribution to global consumption than individuals in the working age range of 15 to 59 years in China. The research conducted by McKinsey reveals that Defined Contribution, the largest segment within the retirement industry, constitutes approximately 30% of the total assets, totaling around $8 trillion. These assets generate an impressive $30 billion in revenue for the managing firms, overseeing approximately 110 million accounts. Notably, the Defined Contribution industry has displayed consistent growth over the last decade.
Lastly, a significant aspect of retirement pertains to the assisted living community sector, also referred to as old age homes. These establishments provide seniors with companionship and care during the latter phases of their lives. As outlined in a research report by Grand View Market Research, the assisted living industry was valued at approximately $91.8 billion in 2022, and is projected to experience a compound annual growth rate (CAGR) of 5.53% from 2023 to 2030. Within the market, the segment catering to individuals aged 85 and above claimed the largest market share in 2022. Looking ahead to 2040, the number of seniors in this age group is projected to more than double, increasing from 6.4 million in 2016 to an estimated 14.6 million.
In this article, we thoroughly examined Vanguard's selection of retirement-oriented funds and curated a list of 11 funds that are highly regarded for their safety and popularity among retirement experts and market analysts. The goal of this compilation is to offer a comprehensive selection of well-regarded funds listed on US exchanges. Furthermore, we have highlighted the top holdings of these ETFs, wherever applicable, which include prominent companies such as Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), NVIDIA Corporation (NASDAQ:NVDA), and Amazon.com, Inc. (NASDAQ:AMZN), to provide deeper insights for potential investors. Lastly, these Vanguard ETFs have demonstrated remarkable growth over the past five years. The list is organized in ascending order based on their five-year performance as of September 14, 2023.
11. Vanguard Growth and Income Fund (MUTF:VQNPX)
5-Year Performance as of September 14: 6.39%
Positioned perfectly between income and growth, the Vanguard Growth and Income Fund (MUTF:VQNPX) aims to surpass the S&Ps 500 Index, making it an attractive option for investors seeking both dividend income and potential stock price appreciation. Investors will gain exposure to leading stocks such as Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA), and Berkshire Hathaway Inc. (NYSE:BRK-B).
10. Vanguard Target Retirement 2070 Fund (MUTF:VSVNX)
5-Year Performance as of September 14: 12.55%
Target-date funds like Vanguard Target Retirement 2070 Fund (MUTF:VSVNX) have been tailored with long-term investors in mind as they prepare for retirement. VSVNX, designed for young investors eyeing retirement around 2070, boasts a modest 0.08% expense ratio, translating to an annual fee of $8 on a $10,000 investment. This fund's primary objective is to achieve capital growth and current income in line with its current target allocation. It accomplishes this by gradually shifting its investments into a more conservative blend of Vanguard funds, including the Total Stock Market Index Fund, Total Bond Market II Index Fund, Total International Stock Index Fund, Total International Bond II Index Fund, and Short-Term Inflation-Protected Securities Fund.
9. Vanguard LifeStrategy Growth Fund (MUTF:VASGX)
5-Year Performance as of September 14: 13.50%
The Vanguard LifeStrategy Growth Fund (MUTF:VASGX) is an excellent choice for younger investors who are comfortable with greater risk. This LifeStrategy fund is geared toward achieving long-term capital growth and maintains a fixed asset allocation, with roughly 80% invested in global stocks and 20% in global bonds. It's worth noting that VASGX does carry a slightly higher expense ratio of 0.14% in comparison to target-date funds and has a minimum investment requirement of $3,000.
8. Vanguard Target Retirement 2060 Fund (NASDAQ:VTTSX)
5-Year Performance as of September 14: 21.02%
Instead of fixating on a specific retirement year, Vanguard adopts a five-year timeframe – for instance, 2056 to 2060 in the instance of VTTSX. This approach renders the fund well-suited for a more adaptable retirement planning approach. As the target retirement date for each fund draws nearer, VTTSX offers investors diversification along with a gradual reduction in stock exposure and a corresponding increase in bond exposure.
7. Vanguard Total World Stock Index Fund ETF (NYSE:VT)
5-Year Performance as of September 14: 27.34%
The Vanguard Total World Stock Index Fund ETF (NYSE:VT) stands out as a top Vanguard retirement fund due to its comprehensive coverage of both developed and emerging markets. It is particularly appealing to investors seeking ETFs with minimal expense ratios, with the fund's expense ratio standing at just 0.07% as of February. Noteworthy among the ETF's holdings are significant companies like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA), and Alphabet Inc. (NASDAQ:GOOG).
6. Vanguard Mid-Cap Index Fund Admiral Shares (MUTF:VIMAX)
5-Year Performance as of September 14: 29.75%
Opting for Vanguard Mid-Cap Index Fund Admiral Shares (MUTF:VIMAX) is a strong choice for bolstering the mid-cap stock segment of your investment portfolio, especially if you're aiming to expand your holdings across a broader spectrum of equities. According to an S&P Global report, mid-cap stocks consistently outperformed the S&P 500 and the S&P SmallCap 600 for most of the 20-year period concluding on August 31, 2015. Some of the notable holdings within VIMAX's portfolio include Motorola Solutions, Inc. (NYSE:MSI), Amphenol Corporation (NYSE:APH), Corteva, Inc. (NYSE:CTVA), and Realty Income Corporation (NYSE:O).
