Retirement funds: Decide what to buy
Once you've chosen the kind of retirement account you want, you'll pick the investments to put in it.
The difference between an account and an investment
When you choose an account, you're deciding how you want the money in the account to be treated.
For example, an IRA has certain rules about how much money you can put in every year and the kind of tax breaks you get.
A taxable account has different rules—mostly about how the money you earn in the account is taxed.
But an account isn't what you're actually buying. It's just a place to hold your investments. There are many types of investments—and thousands of mutual funds, ETFs (exchange-traded funds), and individual stocks, CDs, and bonds you could consider—but choosing among your retirement investment options doesn't have to be difficult.
In fact, investing for retirement can be as easy as figuring out when you think you might retire.
The first step in picking investments: Your asset mix

When saving for retirement, you'll make some decisions that have a big impact on the final amount you have for retirement:
- When you start saving.
- How much you save each year.
But there's also a third factor you might not have thought about:
- The mix of assets you hold.
Why is asset mix important?
Your asset mix is critical, because it determines both the level and types of risk your money is exposed to, as well as the returns you earn on your money.
What's the best asset mix?
That depends on how far away you are from retirement. If you've got 40 years left, you should focus less on the risk of short-term losses and more on maximizing the growth you can expect over the long term.
As you get closer to retirement, however, you'll want to lower your risk of losses (while still earning more than the rate of inflation).
Target-date funds: A modern approach for today's investors

Target-date funds are designed to:
- Identify the mixes of stocks and bonds that offer an appropriate balance between risk and return at every stage of retirement investing.
- Adjust your mix for you as you get closer to retirement.
So, for example, if you think you'll retire in about 40 years, you could choose a target-date fund for people retiring in 2055.
The fund will start out weighted much more heavily in stocks and transition over the next 40 years to a heavier weighting in less-risky assets, and potentially inflation-protected securities as well.
Because these funds are managed for you:
- You won't need to spend time selecting retirement investments that align with your chosen asset mix.
- You won't need to remember to rebalance back to your intended mix when market movements veer you off course.
- You'll lessen the chance of throwing your strategy off course by tinkering with your investment choices in the future.
What do others do?

Most employer-sponsored retirement plans (401(k)s, for example) use target-date funds as the "default" investment for newly enrolled participants. It's a great option if you're not sure what to choose.
Source: Vanguard, How America Saves 2018. This study examined employer retirement plans (and their participants) managed by Vanguard.
Or build your own retirement portfolio

If you enjoy managing investments and want more control, you can determine your ideal asset mix and then choose investments that meet your needs.
Let Vanguard Digital Advisor® be your guide

Vanguard's robo-advisor makes staying on track to your retirement goal simple—through automated, personalized investing.
We can help

Still have questions? We're standing by to make sure you're comfortable with your investment decisions. Just give us a call at 888-387-5539.
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REFERENCE CONTENT
IRA (individual retirement account)
A type of account created by the IRS that offers tax benefits when you use it to save for retirement.
Taxable account
An account that doesn't receive special tax treatment, so all interest, dividends, and capital gains are subject to taxation in the year they're received.
Investment
An asset—like a mutual fund, ETF (exchange-traded fund), stock, bond, or CD (certificate of deposit)—purchased in the hope that it will increase in price or pay income.
Asset mix
The way your account is divided among different asset classes, including stock, bond, and short-term or "cash" investments.
Risk
Usually refers to investment risk, which is a measure of how likely it is that you could lose money in an investment. However, there are other types of risk when it comes to investing.
Return
The profit you get from investing money. Over time, this profit is based mainly on the amount of risk associated with the investment. So, for example, less-risky investments like certificates of deposit (CDs) or savings accounts generally earn a low rate of return, and higher-risk investments like stocks generally earn a higher rate of return.
Target-date fund
A mutual fund intended for retirement savers that automatically rebalances and adjusts its asset mix as investors get closer to retirement. For example, a 20-year-old might invest in a target-date fund for people planning to retire around 2060. Target-date funds are professionally managed and typically diversified across asset classes and market segments.
Inflation-protected security
A type of fixed income investment that pays a rate of interest that increases and decreases based on the rate of inflation.
Rebalance
To move money in your account so that your overall portfolio aligns with the asset mix you selected, usually after market movements have caused it to change.
ETF (exchange-traded fund)
An ETF combines the diversification and professional management of a mutual fund with the trading flexibility and intraday pricing of an individual stock.
Mutual fund
A type of investment that pools shareholder money and invests it in a variety of securities. Each investor owns shares of the fund and can buy or sell these shares at any time. Mutual funds are typically more diversified, low-cost, and convenient than investing in individual securities, and they're professionally managed.