In this article, we will take a look at the 8 Best Vanguard Funds to Invest in for Retirees.
Every year, a significant number of Baby Boomers retire, and millennials are increasingly interested in planning their own retirement, considering the majority of people rely on their jobs as their primary source of income. Unless they have a large inheritance, it is critical to start retirement planning early and carefully, especially in a world rife with income inequity. In a 2024 study evaluating the match formulas of over 1300 employer-sponsored retirement plans, Vanguard discovered that employer contributions around 401(k)s are highly concentrated, with 44% of dollars going to the top 20% of earners. On the other hand, when it comes to retirement planning, Americans are increasingly selecting professionally managed accounts and services. To that purpose, Vanguard offers a variety of target-date retirement funds, some of which appear on our list. These funds have slowly gained traction over the years.
Numerous surveys show that Americans are inadequately prepared for retirement. A poll from the American Savings Education Council, which surveyed more than 2,000 American adults in early 2024, revealed that those aged 45-54 feel the least prepared to retire. Although 76% of Americans feel that saving for retirement is essential, just 39% of respondents had a plan in place to allow them to retire when they want. Furthermore, inflation remains a major issue for retirees, according to an Employee Benefits Research Institute (EBRI) survey, with 31% of workers and 40% of retirees citing it as a primary cause for their lack of trust in retirement funds. Alarmingly, an increasing number of Americans are continuing to work after the age of 65, which was traditionally considered retirement age. This tendency should be more visible than ever in 2025, when more Americans are predicted to reach 65 than in any previous year, according to research by the Alliance for Lifetime Income called the “Peak 65 zone.”
On a brighter note, over 80% of employees believe the SECURE 2.0 Act of 2022’s provision for employer-sponsored emergency savings accounts is seen as beneficial. Recent advice from the Department of Labor and the IRS has also clarified how plan sponsors can incorporate these emergency savings accounts into their offers. Moreover, the retirement industry has invested heavily in programs to address the retirement savings gap and inadequate preparedness of many Americans. These include automatic enrollment, matching contributions, financial literacy education, and institutional programs like multiple employer plans (MEPs). Legislative policies, like the aforementioned SECURE 2.0 Act, are also involved in making retirement more accessible for long-term workers.
In addition, a large element of retirement relates to the assisted living community sector, commonly known as old-age homes. These facilities provide seniors with companionship and care in their final years. According to a report by Grand View Research, the assisted living market was valued at roughly $91.8 billion in 2022 and is expected to rise at a compound annual rate (CAGR) of 5.53% from 2023 to 2030. In that vein, the number of seniors aged 65 and over is predicted to grow from 52 million in 2018 to 95 million by 2060.
Our Methodology
For this list, we looked at Vanguard’s retirement-oriented funds and compiled a list of eight funds that retirement specialists and market watchers perceive as safe and popular. Furthermore, we have highlighted the top holdings of these ETFs, when appropriate. These Vanguard ETFs have grown significantly over the last five years, and the list is arranged in increasing order according to their five-year performance as of February 18, 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8. Vanguard Dividend Growth Fund (NASDAQ:VDIGX)
5-Year Share Price Performance as of February 18: 16.45%
Formed in 1992, the Vanguard Dividend Growth Fund (NASDAQ:VDIGX) focuses on high-quality companies with the potential and commitment to generate dividends over time. The fund focuses on a narrow portfolio of mostly mega-cap stocks with strong balance sheets. While all of the stocks in the fund have increased their dividends in recent years, several have a lengthy history of dividend increases. In that regard, the VDIGX fund is ideal for investors with a well-balanced, long-term or retirement-focused portfolio looking for dividend-paying names.
The Coca-Cola Company (NYSE:KO), a global beverage industry giant best known for its iconic brand Coca-Cola, is one of the top names in the VDIGX fund. The company’s management claimed a 62-year streak of successive rises in last year’s announcement of payment increases, making it an undeniable leader as a dividend stock.
On February 11, Citi analyst Filippo Falorni reaffirmed his Buy rating and $85 price target for The Coca-Cola Company (NYSE:KO). Falorni’s decision comes after the company’s Q4 2024 performance and predicted profitability in 2025. Since pricing was 9% higher than the projected 5.9%, the company’s organic sales growth came in 14% higher than the consensus estimate of 7%.
7. Vanguard Growth and Income Fund (NASDAQ:VQNPX)
5-Year Share Price Performance as of February 18: 21.66%
The Vanguard Growth and Income Fund (NASDAQ:VQNPX) aims to outperform the S&Ps 500 Index, making it an appealing alternative for investors looking for both dividend income and possible stock price increase. It’s worth mentioning that VQNPX has a somewhat higher expense ratio of 0.36% and a $3000 minimum investment requirement.
Broadcom Inc. (NASDAQ:AVGO) is a key holding of the Vanguard Growth and Income Fund (NASDAQ:VQNPX). AVGO is a semiconductor company that produces a wide variety of semiconductor and infrastructure software technologies.
Broadcom Inc. (NASDAQ:AVGO) announced revenues of $14.05 billion in the fourth quarter of 2024, up 51% year-over-year. AI sales climbed 220% from the previous year to $12.2 billion, while semiconductor revenue hit a record high of $30.1 billion. The company’s cutting-edge AI XPUs and Ethernet networking solutions were viewed as the key drivers during the quarter. AVGO currently offers a quarterly dividend of $0.59 per share with a dividend yield of 1.05%, as of February 18.
6. Vanguard Target Retirement 2050 Fund (NASDAQ:VFIFX)
5-Year Share Price Performance as of February 18: 29.08%
Rather than focusing on a single retirement year, some Vanguard funds use a five-year horizon, such as 2046 to 2050 in the case of VFIFX. This technique makes the fund ideal for a more adjustable retirement planning strategy. These funds are intended to be a one-stop shop for retirement investment, becoming more cautious as the desired retirement date approaches by gradually modifying their stock and bond allocation. This implies that investors will not have to perform this balance themselves, thus making it the pinnacle of a set-it-and-forget-it investment technique.
5. Vanguard International Core Stock Fund Investor Shares (NASDAQ:VWICX)
5-Year Share Price Performance as of February 18: 29.91%
Investing in international funds like the Vanguard International Core Stock Fund Investor Shares (NASDAQ:VWICX) assures that an investor benefits from the triumphs of international stock markets. VWICX is an actively managed ETF that provides exposure to developed and emerging non-US economies and remains diversified across many sectors. However, because it invests in non-US equities, the fund’s volatility may be higher than that of a US stock fund.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the largest holdings of the VWICX fund. The tech giant leads as the world’s largest and most advanced semiconductor foundry, manufacturing chips for some of the most well-known companies and contributing to the global technology supply chain.
In the fourth quarter of 2024, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) increased consolidated revenues by 14.3% year-over-year to NT$868.46 billion, while diluted earnings per share for the quarter came in at NT$14.45.
4. Vanguard High Dividend Yield Index Fund Admiral Shares (NASDAQ:VHYAX)
5-Year Share Price Performance as of February 18: 43.12%
The Vanguard High Dividend Yield Index Fund Admiral Shares (NASDAQ:VHYAX) offers wide exposure to U.S. companies that routinely generate higher-than-average dividends. In addition to conventional stock market risks, the fund’s concentration on slower-growing, higher-yielding firms may result in a lower overall return during a big bull market. However, pre-retirees can profit from an all-equity portfolio’s long-term growth potential, which is boosted by dividend reinvestment. Meanwhile, retirees may enjoy the dividend income stream as well as some much-needed capital appreciation to keep up with inflation throughout their retirement years.
Walmart Inc. (NYSE:WMT), the world’s largest brick-and-mortar retailer, is one of the top holdings in VHYAX. The company operates an amazing 100,000 outlets worldwide, leveraging its financial strength to maintain competitive and consistent profits in a typically low-margin industry.
In the first nine months of 2024, Walmart Inc. (NYSE:WMT) earned $22.9 billion in operational cash flow. Its free cash flow increased by $1.9 billion to $6.2 billion throughout this time. This financial position allowed the company to increase dividends for 51 years in a row. As of February 18, the retailer delivered a dividend of $0.21, at a yield of 0.81%.
3. Vanguard Total World Stock Index Fund ETF (NYSE:VT)
5-Year Share Price Performance as of February 18: 51.23%
The Vanguard Total World Stock Index Fund ETF (NYSE:VT) stands out as a top Vanguard retirement fund since it covers both established and emerging economies. It’s an especially decent choice for investors looking for ETFs with low expense ratios, since the fund has an expense ratio of only 0.06% as of this month.
Tech behemoth Apple Inc. (NASDAQ:AAPL) ranks as the fund’s top holding. The company specializes in creating, producing, and selling smartphones, personal computers, tablets, wearables, and accessories.
According to Morgan Stanley, Apple Inc.’s (NASDAQ:AAPL) latest AI initiative, Apple Intelligence, appears to have provided iPhone demand in the United States a little boost during the December quarter. Looking ahead, Morgan Stanley believes that iPhone demand in emerging markets other than China will continue strong, with India leading the way.
Tsai Capital stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:
“We initiated our investment in Apple Inc. (NASDAQ:AAPL) in 2016 and elevated it to a core holding in 2018, the same year the company introduced its redesigned 13-inch and 15-inch MacBook Pro models. Under Tim Cook’s visionary leadership, Apple has consistently redefined innovation in hardware and software.
The September 2024 launch of the iPhone 16, with its groundbreaking AI capabilities, including enhanced image generation tools, marks another inflection point. We believe this transformative device is the foundation for an AI-driven supercycle and could entice approximately 100 million consumers to upgrade, reinforcing Apple’s leadership in the industry.
Today, Apple’s ecosystem spans over two billion active devices, supported by a rapidly-growing base of subscription services. This strategy has helped to turbocharge customer engagement and spending. In the most recent fiscal year, which ended in September 2024, Apple’s high-margin services division accounted for 39.3% of total gross profits, up from 32.8% just two years ago.
Apple’s financial footing remains exceptional, with approximately $50 billion in net cash and marketable securities. Looking ahead, we expect earnings-per-share growth to outpace revenue growth, driven by margin expansion and continued share buybacks.”
2. Vanguard 500 Index Fund Admiral Shares (NASDAQ:VFIAX)
5-Year Share Price Performance as of February 18: 82.97%
For buy-and-hold investors who are comfortable with greater risk levels, the Vanguard 500 Index Fund Admiral Shares (NASDAQ:VFIAX) is a well-known option. This mutual fund closely tracks the S&P 500 index, offering extensive diversification across all 11 stock market categories. It is also extremely cost-effective, with a 0.04% expense ratio and a portfolio turnover rate of only 2.2%.
Amazon.com Inc. (NASDAQ:AMZN), one of the ‘Magnificent 7’, is a top holding in Vanguard 500 Index Fund Admiral Shares (NASDAQ:VFIAX). The company offers consumer goods, advertising, and subscription services both online and in physical stores in North America and across the world. The tech giant is also involved in cloud computing, primarily through its Amazon Web Services (AWS) segment.
On February 10, New Street Research upgraded Amazon.com Inc. (NASDAQ:AMZN) shares, with analyst Dan Salmon raising the price target to $280 from $234 and keeping a Buy rating. Salmon sees AWS as a big driver of Amazon’s future financial growth, with catalysts including increasing AWS collaborations, particularly in artificial intelligence with Trainium 2.
1. Vanguard Mega Cap Growth Index Fund (NYSE:MGK)
5-Year Share Price Performance as of February 18: 126.06%
For investors with some time till retirement, striving for growth is a great goal, and in that regard, few funds have performed better than the Vanguard Mega Cap Growth ETF (NYSE:MGK). MGK is an exchange-traded fund that tracks the CRSP US Mega Cap Index, which includes about 70% of the biggest publicly listed firms in the United States. These giant corporations have a median market capitalization of more than $2 trillion. The ETF is momentum-based by definition, since outperforming stocks grow to account for a higher portion of MGK’s portfolio.
Tech giant Microsoft Corporation (NASDAQ:MSFT) is one of the biggest names in MGK’s portfolio. The company offers a wide range of software, services, and devices that increase productivity and computing proficiency. Microsoft’s cloud computing platform, Azure, is also a key participant in the cloud services industry.
On January 30, RBC Capital Markets reaffirmed its Outperform rating for the MSFT stock, with a $500 price target. The firm recently announced its software industry forecast 2025, where it preferred Microsoft Corporation (NASDAQ:MSFT) for its varied market exposure and position to gain on generative AI.
Bretton Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q4 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) has become the go-to provider of computing services for many emerging AI companies, and its franchise is much more diversified than Alphabet’s, making it a net beneficiary of the AI arms race. Demand for its cloud computing services continued to grow, and the rest of its business (Orce, Windows, Xbox, GitHub, LinkedIn) are also thriving, sending earnings per share up 22% while the stock returned 13%.”
While we acknowledge the potential of MSFT, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
