Vanguard has launched a target date fund directed at the youngest members of the work force who will not be retiring until about 2060.
Vanguard Target Retirement 2060 Fund is directed at the 18- to 20-year olds just starting careers, and also is directed at this age group's grandparents or parents who want to start them off with a retirement account
The fund is designed in part to overcome some of the trepidation that young people may face after the market turmoil of the past few years, says Linda Wolohan, public relations for Vanguard.
Vanguard has $91.4 billion in target date funds that shift to more conservative investments as the saver ages. The 2060 funds will not start to shift for more than 20 years. For the target date funds that exist now, 41% of those eligible under the age of 25 are participants, according to Vanguard research.
Plan sponsors have requested more plans for the youngest employees, she says.
"Professionally managed, diversified investment programs such as target retirement funds have the potential to help shape the future financial security of many people," says Vanguard CEO Bill McNabb, "including young investors just entering the workforce. By virtue of having a low cost, fixed portfolio of stocks and bonds suited to their age, they can get a head start on a lifetime of investing."
The 2060 Fund is designed to provide an automatic way to achieve balanced, age-appropriate stock exposure, addressing concerns by some that young people are not investing in the stock market because of its greater risk and are therefore missing out on its potentially higher returns, Vanguard says.
Vanguard has 11 other target date retirement funds. The company's Web site shows each target date fund's planned asset allocation for each year through seven years beyond the stated retirement date. The minimum investment for target retirement funds is $1,000 rather than the normal $3,000. The expense ratio for the 2060 fund is expected to be 18 basis points rather than the industry average of 60 basis points.