Vanguard has filed a registration statement to offer five age-based funds for people in their 20s to their 70s, retiring between 2005 and 2045, in addition to one retirement income fund. Announcement of the new "Target" series comes just days after Fidelity announced it has launched Advisor share classes on its own five "Freedom" funds.
Vanguards Target Retirement Income Fund will be 20% invested in stocks, 75% in bonds and 5% in money market funds. For those about to retire, the Target Retirement 2005 Fund will have 35% of its money in stocks and 65% in bonds. Taking a more aggressive stance for those with a 40-year-plus horizon before they retire, the Target Retirement 2045 Fund will invest 90% in stocks and 10% in bonds. As the years progress, each of these fund-of-funds, whose maturity dates are 10 years apart, will reallocate their holdings to reduce risk. The funds will charge expense ratios ranging from 21 basis points to 23 basis points. Vanguard expects to sell the funds to individual investors and through defined contribution plans.
Fidelity last Thursday announced it has unveiled Advisor share classes on its existing Fidelity Freedom Funds. This will allow them to be sold beyond plan sponsors through investment professionals at banks, brokerage firms and insurance companies.
The target dates on the Freedom funds range between 2010 and 2040, also in 10-year intervals. The fifth fund, the Fidelity Advisor Freedom Income Fund, is designed for those who have already retired and are seeking low risk and some growth.
The Fidelity Advisor Freedom 2040 Fund will start off 75% invested in domestic equity funds, 15% in international equity funds and 10% in high-yield. The funds carry fees ranging from a 5.75% front-end load on class A shares to no load on institutional shares.