Vanguard Sees Continued Explosion in Target-Date Fund Usage

The Vanguard Center for Retirement Research reported that the use of target-date funds in defined contribution plans administered by Vanguard continues to grow rapidly.

A Vanguard news release said at the end of 2008, seven in 10 such plans offered a target-date fund, and more than one-third of participants opted for them.

The report notes that three factors were fueling the adoption of target-date funds by plan sponsors and participants:

  • the funds’ simplified approach to investment decisionmaking;
  • the growing use of automatic enrollment within plans;
  • target-date funds’ designation as a qualified default investment option under the Pension Protection Act of 2006.