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.
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