Vanguard has announced the launch of its Target Retirement Lifetime Income Funds in December 2025, aiming to enter a market that BlackRock has already tapped into with lifecycle-style exchange-traded funds (ETFs) that feature income annuities. These new funds will be distinct from Vanguard’s existing target retirement funds introduced in 2003, as they will incorporate annuities to provide guaranteed income, beginning once investors reach the age of 55.
The new Target Retirement Lifetime Income Funds will be exclusively available through employer-sponsored plans such as 401(k)s and 403(b)s, a restriction that could limit options for retirees. This is particularly noteworthy because many individuals rolling over their retirement funds to IRAs often seek greater investment flexibility and lower fees, which may not be attainable with these funds.
The funds will utilize Collective Investment Trusts (CITs) rather than traditional mutual funds, a move that could make them less accessible for research and comparison purposes. The annuity component is expected to be managed by TIAA-CREF, aimed at enhancing income stability during retirement and potentially mitigating sequence of returns risk.
Critics have expressed caution regarding the new offerings, suggesting that they may not suit individuals with diverse retirement accounts, as lifecycle funds often become less practical in more complex financial situations. While Vanguard’s initiative is recognized as a potentially innovative solution for guaranteed income, it is also seen as possibly not addressing the nuanced needs of a broader range of investors.
Why this story matters:
- It highlights Vanguard’s new approach to retirement income through annuities, responding to market trends.
Key takeaway:
- The Target Retirement Lifetime Income Funds offer guaranteed income options but are limited to employer-sponsored plans.
Opposing viewpoint:
- Many investors may prefer direct annuitization or have complex retirement portfolios that make these new funds less relevant.
