Vanguard has announced that it will no longer provide one of its four defined benefit (DB) retirement plan services. The firm will continue to provide DB plan sponsors with its low-cost investments, trustee and payment services, and investment advisory services, but will cease offering administration for DB plans.
The use of low-cost index funds by participants in Vanguard 401(k) plans rose sharply from 2004 to 2012, with the average participant now investing 60% of his or her account balance in index funds, according to a new Vanguard study.
More than half of the participants in 401(k) retirement plans at Vanguard now hold a target date fund, giving them a disciplined approach to taking risks with their investments that automatically grows more conservative as they age and prevents extremes in asset allocations.
This paper examines the key factors that determine a TDF's glide path, the impact of costs particularly in the decision making process, and the tactical flexibility that's permitted in some glide path construction that could affect stability.
Vanguard's guidance for investors is centered on four core principles: Define clear goals, invest with balance and diversification, minimize cost, and stay disciplined over the long term. This updated paper explains the rationale and data behind these principles.