Vanguard is continuing to lower the cost of investing by broadening access to Vanguard Institutional Target Retirement Funds (TRFs). Effective immediately, the plan-level minimum investment requirement has been reduced to USD5 million from USD100 million, enabling more 401(k) and 403(b) plan sponsors to offer these low-cost, broadly diversified options to their retirement plan participants.
The average expense ratio of Vanguard’s index-based Institutional TRFs—which mirror the glide path and asset allocation of Vanguard Target Retirement Funds—is 0.09 per cent, 85 per cent lower than the industry average.
“Whether it be through technology-driven innovations, leading advice solutions, or world-class fund offerings, Vanguard works tirelessly to improve outcomes for plans sponsors and their participants,” said John James, managing director and head of Vanguard Institutional Investor Group. “When it comes to people’s hard-earned retirement savings, Vanguard is dedicated to continuing to lower the cost and complexity of investing to best steward the financial well-being of the millions of retirement plan participants we serve.”
Target-date funds have continued to reshape the defined contribution (DC) landscape, driving meaningful progress for American workers saving for retirement. Designed as an all-in-one solution for those without the time, willingness, or ability to build and manage their own portfolio, four out of five participants in 401(k) plans recordkept at Vanguard are now invested in a target-date fund. Moreover, Vanguard research has shown that target-date funds have dramatically improved participants’ portfolio diversification.
According to Vanguard research, since 2006, the increased adoption of target-date funds has driven a 75 per cent reduction in extreme equity allocations, ensuring more retirement savers are invested in long-term, risk-appropriate investment solutions. Combined with other prudent plan design features, target-date funds also mitigate more risky trading activity and encourage long-term financial discipline, even amid significant market volatility. In a recent study, Vanguard found that 98 per cent of target-date investors “stayed the course” during the market volatility in the first four months of 2020.