7 Best Vanguard Funds for Retirement

Should the best Vanguard funds be in your portfolio?

Investing for retirement can be complicated and nerve-wracking. Figuring out how to use your 401(k) or individual retirement account is tricky enough, but choosing stocks to fund your golden years involves a whole different skill set. Plus, learning how to invest well in stocks takes time you might not have.

Well known for its low-cost mutual funds, Vanguard offers choices that make good investments for an investor’s retirement savings. Here’s what you need to know about the best Vanguard funds for your situation, so you can take the guesswork out of investing for retirement:

What Are Vanguard Funds?

Vanguard funds are low-cost mutual funds with a reputation for low expense ratios and competitive performance. As of January 2020, Vanguard offers more than 400 funds in both U.S. and global markets. These include actively managed mutual funds as well as the company’s hallmark index funds.

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What Are the Best-Performing Vanguard Funds?

Although it can be helpful to research how funds have performed in the past, there’s no way to predict how they will do in the future. The following Vanguard funds averaged double-digit annual returns between 2010 and 2020:

  • U.S. Growth: 16.30%
  • 500 Index Admiral Shares: 13.12%
  • Total Stock Market Index Admiral Shares: 12.81%
  • Explorer: 12.61%
  • International Growth: 10.04%

Learn More: Vanguard Investing Review — More Than a Mutual Fund Company?

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Best Vanguard Funds
 for Retirement

To be effective for retirement, a fund should offer a solid, time-tested investment strategy and low costs, both of which are key features of Vanguard funds. Here are seven picks that rank as some of the best Vanguard funds for retirement.

Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

The Vanguard Total Stock Market Index Fund Admiral Shares fund invests in micro-, small-, mid- and large-cap stocks, including companies like Microsoft, Amazon and Johnson & Johnson. This low-cost fund provides broad diversification for investors willing to accept the volatility of the U.S. stock market.

  • Five-year average annual return: 9.15%
  • Average annual return since inception: 6.70%
  • Expense ratio: 0.04%

Vanguard International Growth (VWIGX)

The Vanguard International Growth fund invests in non-U.S. companies with a potential for growth. It can be more volatile than domestic funds, so investors may want to pair it with a core fund. At the same time, it has greater potential upside, as it offers diversification beyond the U.S. economy.

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  • Five-year average annual return: 9.14%
  • Average annual return since inception: 10.56%
  • Expense ratio: 0.43%

Vanguard Wellington Fund (VWELX)

Consider the Vanguard Wellington Fund if you like the idea of a single fund that mixes stocks and bonds for you but don’t want the allocation to change as you get older. It has plenty of equity exposure to provide long-term gains while offering the moderating presence of bonds and solid income.

  • Five-year average annual return: 7.13%
  • Average annual return since inception: 8.24%
  • Expense ratio: 0.25%

Vanguard Equity Income Fund (VEIPX)

The Vanguard Equity Income Fund seeks income from dividend-paying stocks. It provides investors above-average current income and exposure to the stock market for long-term growth.

  • Five-year average annual return: 6.63%
  • Average annual return since inception: 9.73%
  • Expense ratio: 0.27%

Vanguard Value Index Fund Admiral Shares (VVIAX)

Designed to track the performance of the CRSP U.S. Large Cap Value Index, the Vanguard Value Index Fund Admiral Shares fund invests in companies that tend to grow at a slower pace than other parts of the market. These companies include Procter & Gamble, JPMorgan Chase and Verizon Communications.

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  • Five-year average annual return: 6.18%
  • Average annual return since inception: 5.90%
  • Expense ratio: 0.05%

Vanguard Wellesley Income Fund (VWINX)

The Vanguard Wellesley Income Fund is a good conservative option for investors who want to offset more aggressive funds in a retirement portfolio. Unlike other balanced funds, the Wellesley Income Fund has just one-third of its investments in stocks and the rest in investment-grade bonds. The result is a fund that generates solid ongoing income while still offering exposure to a rising stock market.

  • Five-year average annual return: 6.10%
  • Average annual return since inception: 9.63%
  • Expense ratio: 0.23%

Vanguard Target Retirement Income Fund (VTINX)

Designed for people who have already retired, the Vanguard Target Retirement Income Fund provides long-term growth from the markets in a less volatile investment. It invests in a 70/30 split of bonds and stocks. The result is a solid core investment for those with low risk tolerance.

  • Five-year average annual return: 4.37%
  • Average annual return since inception: 5.24%
  • Average expense ratio: 0.12%

Find Out: What Is a Mutual Fund Expense Ratio and How Does It Affect Returns?

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How To Invest In Vanguard Funds

You can buy Vanguard funds online if you have a Vanguard Brokerage Account or a Vanguard account. To open an account, you’ll have to complete an online application, set up a funding method and sign up for online access.

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When you’re ready to buy a fund, visit the “Buy funds” page on the company’s website. From there, you’ll select the fund you want to buy, provide the dollar amount you want to purchase and select the funding method before submitting the completed order.

Up Next: Mutual Fund Fees — What You Need To Know Before Investing

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Information is accurate as of June 17, 2020. 

This article has been updated with additional reporting since its original publication.

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About the Author

Brian Nelson is a Denver-based writer who specializes in writing about finance, technology, and other complex topics. As a former Certified Financial Planner, Brian spent years helping people understand their finances and learned that not all successful financial planning is about numbers. Brian has written for numerous financial planning firms, personal finance websites and financial publications including Dow Jones Publications.