Investors could save $100,000 over 30 years by switching to a low-fee VT/BND blend instead of industry-average target-date funds.
A 90/10 blend of Vanguard Total World Stock ETF (VT) and Vanguard Total Bond Market ETF (BND) charges just 0.06%, compared to the 0.30% average fee for target-date funds. Over a 30-year career, this difference can save investors five figures in fees.
Most 401(k) plans restrict access to individual ETFs, but rollover and Roth IRAs allow contributions to the two-fund alternative without triggering capital gains. Vanguard’s own target-date series charges 0.08%, nearly matching the ETF blend’s cost.
Target-date funds dominate retirement savings, with 96% of Vanguard plans offering them and 64% of contribution dollars flowing into them. Among Gen Z workers on Fidelity’s platform, 81% hold all their 401(k) savings in a single target-date fund.