While this approach can be a disadvantage in the short run — such as in 2022 when inflation surged and interest rates spiked — it aligns with the long time horizons that target-date funds are built for. As a result, the series continues to earn an Above Average Process rating.
This series is designed to help investors replace roughly 80% of their income in retirement (including an assumption that investors take Social Security at age 65). That leads to a glide path that takes a bit more stock market risk than peers at the retirement date to combat the possibility an investor outlives their savings.
Investors in the funds furthest from retirement start with 90% in stocks and 10% in bonds until 25 years from retirement. Then the stock exposure starts to decline until arriving at 30% seven years after age 65. Five years from retirement, investors have about 60% in stocks, 5 percentage points higher than the norm; and at retirement, it hits 50%, 6 percentage points higher than the average peer.
The series has historically had a home bias toward US stocks and bonds, but the US stock market’s outperformance over the last decade has left the series underweight in US stocks relative to their global market cap. Its 60% strategic US stock weighting within the stock portfolio is about 5 percentage points below the weighting in the global stock market.
The series’ equity portfolio consists of two index funds: Vanguard Total Stock Market Index and Vanguard Total International Stock Index. Both offer market-cap-weighted exposure to stocks within their respective regions and stretch from mega-caps to small caps. The US total stock market fund, for example, had a 6% allocation to small and micro-caps as of February 2025. The international total stock market fund had a similar stake in smaller international companies. It also had about 25% in emerging-markets equities.
The team’s most recent change to the underlying funds was to add Vanguard Total International Bond Index to the bond allocation throughout the glide path in 2013. Vanguard added international bonds to broaden the diversification of the fixed-income portfolio and spread out the interest-rate, credit, and country risks. Notably, the international bond fund hedges its foreign-currency risk to the US dollar. Without this hedge, most of the fund’s volatility would come from currency fluctuations.
US fixed-income exposure comes from Vanguard Total Bond Market II Index and Vanguard Short-Term Inflation-Protected Securities Index. The latter enters the series in the years leading up to retirement. The team prefers short-term Treasury Inflation-Protected Securities exposure because it provides a shorter-duration profile and purer inflation protection.
