How target-date funds support retirement income

The Vanguard Target Retirement suite offers multiple glide-path options designed to help a wide range of participants retire when they want and meet their retirement spending needs (see Figure 1). Our core Target Retirement Trusts remain a strong QDIA choice for most plans. We’ve also thoughtfully expanded our offerings to address evolving participant needs and preferences—without compromising the strengths of our time-tested, investor-focused approach.

The Target Retirement Trusts provide a simple, effective solution for many participants, with the potential for an alternative equity landing point through the Target Retirement Income and Growth Trust. And the Target Retirement Lifetime Income Trusts offer a target-date strategy with a built-in annuity component for an optional guaranteed income stream.

Retirement is a phase, not a single point in time. That’s why our core Target Retirement Trusts have long featured a “through retirement” glide path.

The glide path continues to evolve after the target retirement date (age 65), gradually shifting toward an allocation designed to support withdrawals and limit sequence of returns risk. Vanguard Target Retirement Income Trust reaches its final allocation around age 72, landing at approximately 30% equities and 70% bonds (see Figure 2).

While we consider the Target Retirement Income Trust to be our core glide-path landing point for average investors, the Target Retirement Income and Growth Trust provides an additional landing point option for participants who are comfortable with the additional risk associated with holding more equities through retirement—particularly those who save at higher rates, have additional sources of retirement income, or anticipate higher discretionary spending.

Target Retirement Income and Growth Trust gives participants the option to maintain the glide path’s age‑65 allocation, resulting in a higher equity exposure of approximately 50% through retirement (see Figure 4). This approach allows participants to retain greater growth potential while remaining invested in a diversified, professionally managed portfolio.

Notes

¹ How America Saves 2026. Vanguard.

² All guarantees are subject to TIAA’s claims-paying ability.

Disclosures

For more information about any fund, visit workplace.vanguard.com or call 866-499-8473 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

Investments in Target Retirement Funds and Trusts are subject to the risks of their underlying funds. The year in the fund or trust name refers to the approximate year (the target date) when an investor in the fund or trust would retire and leave the workforce. The fund/trust will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. The Income Trust/Fund and Income and Growth Trust have fixed investment allocations and are designed for investors who are already retired. An investment in a Target Retirement Fund or Trust is not guaranteed at any time, including on or after the target date.

Vanguard is responsible only for selecting the underlying funds and periodically rebalancing the holdings of target-date investments. The asset allocations Vanguard has selected for the Target Retirement Funds are based on our investment experience and are geared to the average investor. Investors should regularly check the asset mix of the options they choose to ensure it is appropriate for their current situation.

Vanguard collective trusts are not mutual funds. They are collective trusts available only to tax-qualified plans and their eligible participants. Investment objectives, risks, charges, expenses, and other important information should be considered carefully before investing. The collective trust mandates are managed by Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc.

All investing is subject to risk, including the possible loss of the money you invest. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure a profit or protect against a loss.

Advisory services are provided by Vanguard Advisers, Inc. (VAI), a registered investment advisor. Eligibility restrictions may apply.

The Vanguard Life-Cycle Investing Model (VLCM) is designed to identify the product design that represents the best investment solution for a theoretical, representative investor who uses the target-date funds to accumulate wealth for retirement. The VLCM generates an optimal custom glide path for a participant population by assessing the trade-offs between the expected (median) wealth accumulation and the uncertainty about that wealth outcome, for thousands of potential glide paths. The VLCM does this by combining two sets of inputs: the asset class return projections from the VCMM and the average characteristics of the participant population. Along with the optimal custom glide path, the VLCM generates a wide range of portfolio metrics such as a distribution of potential wealth accumulation outcomes, risk and return distributions for the asset allocation, and probability of ruin, such as the odds of participants depleting their wealth by age 95.

The VLCM inherits the distributional forecasting framework of the VCMM and applies to it the calculation of wealth outcomes from any given portfolio.

The most impactful drivers of glide-path changes within the VLCM tend to be risk aversion, the presence of a defined benefit plan, retirement age, savings rate, and starting compensation. The VLCM chooses among glide paths by scoring them according to the utility function described and choosing the one with the highest score. The VLCM does not optimize the levels of spending and contribution rates. Rather, the VLCM optimizes the glide path for a given customizable level of spending, growth rate of contributions, and other plan sponsor characteristics.

A full dynamic stochastic life-cycle model, including optimization of a savings strategy and dynamic spending in retirement, is beyond the scope of this framework.

The TIAA Secure Income Account is a group annuity contract issued by Teachers Insurance and Annuity Association of America (TIAA), New York, NY. TIAA Secure Income Account interest and income benefits include guaranteed amounts plus additional amounts as may be established on a year-by-year basis by the TIAA Board of Trustees. The additional amounts, when declared, remain in effect through the “declaration year,” which begins each March 1 for accumulating annuities and January 1 for payout annuities. Any guarantees under annuities issued by TIAA are subject to TIAA’s claims-paying ability. The TIAA Secure Income Account is a guaranteed insurance contract and not an investment for federal securities law purposes. Past performance is no guarantee of future performance. Form series including but not limited to: TIAA-UQDIA-002-K, TIAA-STDFA-001-NUV and related state-specific versions. Not all contracts are available in all states or currently issued.

Converting some or all of their savings to income benefits (referred to as annuitization”) is a permanent decision. Once income benefit payments have begun, the investor is unable to change to another option.

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