Three people are smiling while looking at a smartphone.

Retirement

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.

7 minute read

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.

See what Vanguard Target Retirement Funds offer

Explore professional advice

We offer expert help at the low cost you'd expect from Vanguard.

Compare advice options

Use our handy tools

You're putting money away for your future, but how do you know if it will be enough?

See if you'll have enough to retire

Roll over your retirement money

Did you leave retirement savings behind at an old job? Get more flexibility and easier money management.

See if a 401(k) rollover is right for you

Open a Vanguard IRA®

Find out how an IRA can help you start saving—and get tax benefits—today!

Learn more about IRAs

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date.

For more information about Vanguard funds or ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.

The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.

VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.