The Vanguard Target Retirement 2035 Fund (NASDAQMUTFUND:VTTHX) is a target date mutual fund designed to help make it easy for those who intend to retire in or around the year 2035 to save toward retirement. The Vanguard Group has set up this fund as a one-stop solution for investors looking for simplicity, and the fund invests in various other Vanguard-run investments in a way that changes over time to match the changing risk profile of investors as they get every closer to retirement. By matching asset allocations to risk tolerance, Vanguard Target Retirement 2035 aims to offer stock and bond exposure in a single package that produces the income and growth that investors need over the course of their lifetimes.

What is the Vanguard Target Retirement 2035 Fund's objective?

Vanguard set up the Vanguard Target Retirement 2035 Fund in accord with its broader philosophy for its target retirement funds. The fund provides broad diversification while decreasing exposure gradually to stocks over time, increasing exposure to bonds as the fund's target retirement date approaches. Those adjustments continue until seven years after the retirement date, at which point the fund matches the allocation for Vanguard's Target Retirement Income Fund.

Vanguard advises investors to consider this fund if you're planning to retire between 2033 and 2037. That corresponds roughly to those born between the late 1960s and the mid-1970s, which picks up a wide swath of the Generation X cohort.

Vanguard Group logo.

Image source: Vanguard Group.

What is Vanguard Target Retirement 2035's asset allocation strategy?

Vanguard Target Retirement 2035 currently has an overall asset allocation of about 80% in stocks and 20% in bonds. That reflects the fact that the fund has a time horizon of 18 years before retirement, giving investors plenty of time to weather shorter-term movements in the stock market and making an aggressive investment stance appropriate.

In particular, Vanguard Target Retirement 2035 has allocations to the following four Vanguard mutual funds:

Fund

Percentage

Vanguard Total Stock Market Index Fund

47.6%

Vanguard Total International Stock Index Fund

31.9%

Vanguard Total Bond Market II Index Fund

14.5%

Vanguard Total International Bond Index Fund

6%

Data source: Vanguard Group.

How much does the fund cost?

Vanguard Target Retirement 2035 doesn't charge a sales load or other charge to purchase shares. Annual expense ratios amount to 0.15%, or roughly $15 per year for every $10,000 invested in the fund. Vanguard requires a $1,000 minimum investment to open a fund account, whether you do so in your regular taxable portfolio or within an IRA or other specialized account type.

How much income does the fund provide?

With a target date of 2035, the Vanguard target fund is focused right now more on capital appreciation than on providing current income to its shareholders. That's likely to change over time, as the greater allocation to bonds opens up new opportunities for greater income payments.

However, the current yield of just over 2% reflects the fact that stock market dividends provide income to the fund. Indeed, with the average dividend yield of the S&P 500 and the current yield on the 10-year Treasury bond both near the 2% mark, investors are getting balanced income from both sides of the fund's portfolio. The fund's income payments get made annually, and they include not only dividend income distributions but also any required payouts for short- and long-term capital gains realized over the course of the year.

Is Vanguard Target Retirement 2035 right for you?

The Vanguard target date fund offers an easy solution for saving, but it isn't the best for everyone. Some will notice that they can instead purchase the underlying Vanguard mutual funds themselves and pay slightly lower expenses of 0.04% to 0.12% per year. For wealthier investors, self-service can save hundreds of even thousands of dollars in annual fees.

Also, in order to invest in the fund, you should be comfortable with the way that Vanguard allocates assets throughout its target fund suite. Some were surprised to discover during the financial crisis in 2008 that even target funds close to the retirement target were heavily invested in stocks, leading to unexpectedly large losses. There are reasons to own stocks well into retirement, but if they don't apply to you -- or if you're not comfortable with that philosophy generally -- then Vanguard's offerings won't necessarily meet your needs.

That said, if you're looking for an easy way to save toward a retirement in or around 2035, Vanguard Target Retirement 2035 has a lot going for it. With a simple yet comprehensive investment portfolio and low costs, this Vanguard fund could be just what you need to jump-start your retirement savings.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.