9 Best Vanguard Retirement Funds

Choose the best Vanguard funds for your retirement plan.

Investing for retirement can be complicated and nerve-wracking. Figuring out how to use your 401k and IRA are 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 includes choices that make good investments for an investor’s retirement savings. Here’s what you need to know about the best Vanguard mutual funds for your situation, so you can take the guesswork out of investing for retirement.

9 Top Vanguard Retirement Funds

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

1. Vanguard Target Retirement Funds

  • Five-year annual average return: 10.80 percent
  • Average annual return since inception: 7.10 percent
  • Average expense ratio: 0.13 percent

The Vanguard Target Retirement Fund series offers an all-in-one, “set it and forget it” way to save for retirement. The funds invest in other Vanguard funds to provide a full mix of stocks, bonds and international exposure.

As your retirement date gets closer, the funds get more conservative switching from an 85 percent stock and 15 percent bond mix in the 2040 Fund down to 55 percent stock and 45 percent bond mix in the 2020 Fund. For an investor looking for the simplest solution, this fund does it all.

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2. Vanguard 500 Index Fund (VFINX)

  • Five-year annual average return: 14.06 percent
  • Average annual return since inception: 11.01 percent
  • Expense ratio: 0.14 percent

The Vanguard 500 Index Fund seeks to emulate the returns of the Standard & Poor’s 500 index. By offering exposure to 500 of the largest stocks in the U.S., this mutual fund can be a core holding in any retirement plan. And with an expense ratio of just 0.14 percent, you don’t have to worry about fees eating up your returns.

3. Vanguard Wellesley Income Fund (VWINX)

  • Five-year annual average return: 6.82 percent
  • Average annual return since inception: 9.84 percent
  • Expense ratio: 0.22 percent

The Vanguard Wellesley Income Fund is a good conservative fund for investors approaching retirement or who are already retired and a perfect way 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, with a current Securities and Exchange Commission yield of 2.64 percent, while still offering exposure to a rising stock market.

4. Vanguard High-Dividend Yield Fund (VHDYX)

  • Five-year annual average return: 13.34 percent
  • Average annual return since inception: 7.61 percent
  • Expense ratio: 0.15 percent

Vanguard’s high-dividend yield fund offers income while still providing an investment vehicle invested 100 percent in stocks. It accomplishes this by investing in stocks that pay larger-than-average dividends. As a result, retirement investors get a current SEC yield of 2.79 percent while still being fully invested in the stock market, which makes this fund a great income addition — particularly for younger investors who still need long-term growth.

5. Vanguard Equity Income Fund (VEIPX)

  • Five-year annual average return: 13.27 percent
  • Average annual return since inception: 10.30 percent
  • Expense ratio: 0.26 percent

Like the high-dividend yield fund, the Vanguard Equity Income Fund seeks income from dividend-paying stocks. The result is another fund that provides income while still providing exposure to the stock market for long-term growth. Retirement investors can use this fund instead of the high-dividend fund, or in tandem as a way to get more diversification in their equity income holdings.

6. Vanguard International Growth (VWIGX)

  • Five-year annual average return: 11.46 percent
  • Average annual return since inception: 10.76 percent
  • Expense ratio: 0.46 percent

The Vanguard International Growth fund invests in non-U.S. companies. Although investments in international stocks can be more volatile due to currency issues and less developed economies, this fund has greater potential upside as well. When paired with a core fund like the Vanguard S&P 500 Fund and an income fund, this fund offers diversification beyond the U.S. economy.

7. Vanguard Target Retirement Income Fund (VTINX)

  • Five-year annual average return: 4.68 percent
  • Average annual return since inception: 5.33 percent
  • Expense ratio: 0.13 percent

The Vanguard Target Retirement Income fund is designed for people who have already retired, but still need long-term growth from the markets in a less volatile investment. The fund invests in a 70 percent bonds and 30 percent stocks split, which substantially lowers the volatility of an all-stock fund.

The result is a solid core investment for those with low risk tolerance or those getting close to retirement. With a yield of 1.75 percent, this fund still offers a solid income to draw on while leaving the principal invested. And all Vanguard Target Retirement Funds eventually convert to this fund during the years after the target retirement date is reached.

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8. Vanguard Morgan Growth Fund Investor Shares (VMRGX)

  • Five-year annual average return: 14.84 percent
  • Average annual return since inception: 10.40 percent
  • Expense ratio: 0.38 percent

Retirement investors with a long way to go need an aggressive mutual fund with the chance for some real upside. Technically run by four different managers — to allow diversification despite its large size — this fund invests in both large and middle-sized American companies.

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With the stock market roaring ahead, this fund has returned over 22 percent for its one-year return. Of course, it is likely to come down a little harder than its more conservative brethren when the markets turn, so it should be paired with more conservative fare — especially for investors near retirement.

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9. Vanguard Wellington Fund (VWELX)

  • Five-year average annual return: 10.10 percent
  • Average annual return since inception: 8.29 percent
  • Expense ratio: 0.25 percent

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. Founded in 1929, the fund still offers the same two-thirds stocks to one-third bonds. Plus, the fund invests across the whole spectrum — from large to small companies in every sector.

Like the target date retirement funds, this one fund can be a good “set it and forget it” pick for many retirement investors. Although income is not the fund’s primary focus, it still has a current SEC yield of 2.29 percent. Additionally, the fund has plenty of equity exposure to provide long-term gains while offering the moderating presence of bonds and solid income.

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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.