Vanguard Reports Uptick in Target-Date Funds

A new Vanguard study reports a significant increase in the use of target-date funds in retirement plans.

In 2009, 75% of defined contribution plans at Vanguard offered a target-date fund, up from 13% in 2004, and 42% of the participants in those plans invested in the funds. Of those 42% participants, Vanguard estimates that half chose the funds voluntarily rather than being placed in them as a default investment.  

Of all plans at Vanguard that have designated a qualified default investment alternative (QDIA ), 80% had chosen target-date funds as the default. In addition, 21% of Vanguard plans have adopted automatic enrollment—quadruple the number since the end of 2005—and nine in 10 plans with automatic enrollment are using target-date funds as their designated default fund. 

The report, “Target-Date Fund Adoption in 2009,” analyzed 3.2 million participants holding 3.4 million accounts in 2,200 defined contribution plans administered by Vanguard.