Vanguard Target Retirement 2045 Fund (VTIVX) Review

VTIVX Review: Preparing for the day that you can finally leave the workforce means careful saving and smart investing over decades. Unfortunately, this is easier said than done – especially for those who don’t have a lot of interest in the nuances of the market. You know that higher rewards mean higher risk, but how do you find the right balance between keeping your money safe and ensuring it grows?

That isn’t the only question. There are issues to consider when it comes to making the most of retirement-focused tax breaks, as well as important decisions on where to invest and how to diversify your portfolio. It’s enough to leave anyone feeling overwhelmed.

The good news is that some of the most reputable investment firms in the country have developed funds that take the guesswork out of retirement savings. Each is structured around a specific retirement timeframe, and the mix of underlying assets is balanced between risk and reward in a manner appropriate for the projected length of time before retirement.

Investors simply buy shares of primary fund to get the benefit of expert management designed to maximize wealth in the allotted timeframe. The Vanguard Target Retirement 2045 Fund (VTIVX) is a popular option for those with a target retirement date of 2045.

What is VTIVX?

Vanguard is a highly-respected name in the investment world, and it has been in business for more than 40 years. The company differentiates itself from its peers through its ownership structure. It is owned by its clients rather than private outside parties, which means there is no incentive to charge high fees to boost profits. Vanguard has a collected of retirement funds with targeted dates, so you can own the right mix for your financial goals with the purchase of a single fund.

The Vanguard Target Retirement 2045 Fund (VTIVX) is intended for those who still have 20 – 30 years left in the working world. A single share gives you access to a mix of underlying funds that ensure your portfolio has the diversification you need to maximize earnings over time. It offers a balance of risk and reward that makes sense for money being set aside for two to three decades, and it does all of this for a fee that is lower than the market average.

What is a 2045 Retirement Fund?

As with all retirement funds, a 2045 retirement fund is regularly adjusted based on your projected retirement date. When you invest in a 2045 fund, your initial portfolio is weighted towards assets that are higher risk, but they also offer higher rewards. That means your money grows fastest during the early years of your investment.

In this particular case, VTIVX invests in four Vanguard index funds. Approximately 90 percent of your savings are in equities, while the remaining 10 percent is invested in bonds. Over time, the 2045 retirement fund slowly changes its investment mix to reduce your risk. Eventually, the 2045 fund looks like the standard Target Retirement Income Fund, which is designed to minimize risk while offering reliable income during your retirement years.

VTIVX Fact Sheet

As with any investment, you should have a solid understanding of basic features and characteristics before buying shares. These are the facts you need to know for VTIVX:

  • Acquired fund fees and expenses as of 01/28/2019 – 0.15 percent

Note: This is an average of 67 percent lower than the fees charged by other funds with similar holdings. That’s an important difference – the amount you pay in fees can dramatically change your long-term results.

  • Minimum Investment – $1,000
  • Fund Total Net Assets – $27.4 billion
  • 52-week high 11/27/2019 – $24.64 per share
  • 52-week low 12/24/2018 – $19.79 per share
  • Year-to-Date Investment Returns as of 11/30/2019 – 21.28 percent

Average Annual Returns:

  • One Year – 13.31 percent
  • Three Years – 11.34 percent
  • Five Years – 7.55 percent
  • Ten Years – 9.89 percent

These returns are in-line with similar life-cycle funds.

VTIVX Investment Strategy

If you buy shares in VTIVX today, the underlying assets look something like this:

  • Vanguard Total Stock Market Index Fund Investor Shares – 53.80 percent
  • Vanguard Total International Stock Index Fund Investor Shares – 36.20 percent
  • Vanguard Total Bond Market II Index Fund – 7.10 percent
  • Vanguard Total International Bond Index Fund Investor Shares – 3.00 percent

As mentioned, average annual returns for this fund over the past ten years came in at 9.89 percent.

Compare this to Vanguard’s Target Retirement Income Fund  (VTINX), which is designed for people who are already retired:

  • Vanguard Total Bond Market II Index Fund – 37.20 percent
  • Vanguard Total Stock Market Index Fund Investor Shares – 18.20 percent
  • Vanguard Short-Term Inflation-Protected Securities Index Fund – 16.50 percent
  • Vanguard Total International Bond Index Fund Investor Shares – 15.90 percent
  • Vanguard Total International Stock Index Fund Investor Shares – 12.20 percent

The Target Retirement Income Fund has only 30 percent of its assets in stocks, with the remaining 70 percent in low-risk bonds. Average annual returns over the past ten years came in at 5.67 percent.

Do Vanguard Target Funds Pay Dividends?

Vanguard Target Funds do pay dividends, and VTIVX distributions are scheduled annually. For 2018, the per share distribution was $0.48330, and it was paid based on a record date of 12/27/2018.

VTIVX Review Summary

Overall, VTIVX is a smart choice for investors who are looking for a simple method of saving for retirement when retirement is projected to occur within a few years of 2045. The Vanguard Target Retirement 2045 Fund (VTIVX) offers a diversified asset mix that automatically adjusts as you get closer to your retirement date. Its performance is comparable to that of similar funds, and the lower fees help you to maximize your lifetime earnings.

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