The Vanguard Target Retirement 2045 Fund (NASDAQMUTFUND:VTIVX) is a target date mutual fund aimed at those who intend to retire in or around the year 2045. By setting up this fund as a one-stop solution for investors looking for simplicity, the Vanguard Group aims to make it easier to save toward retirement. The fund invests in a number of other Vanguard-run investments, and its asset allocation shifts over time to become more conservative in its investing style. By making changes to the proportion of stocks and bonds in the portfolio, Vanguard Target Retirement 2045 can be a lifelong answer for those who are in their 30s now and are looking to retire roughly 25 to 30 years from now.

What is the Vanguard Target Retirement 2045 Fund's objective?

The Vanguard Target Retirement 2045 Fund's objective is consistent with Vanguard's broader philosophy that covers all of its target retirement funds. The fund keeps a well-diversified portfolio, decreasing stock market exposure gradually over time in favor of increasing bond allocations as the fund's target retirement date approaches. That trend continues for seven years after the retirement date, at which point the fund mimics the investment philosophy of Vanguard's Target Retirement Income Fund.

Vanguard advises investors to consider this fund if you're planning to retire between 2043 and 2047. That corresponds roughly to those born between the late 1970s and the mid-1980s, which picks up most of those in their 30s right now.

Retirement jar with cash and calculator.

Image source: Getty Images.

What is Vanguard Target Retirement 2045's asset allocation strategy?

Vanguard Target Retirement 2045 currently has an overall asset allocation of about 90% in stocks and 10% in bonds. That seems appropriate for a fund with a time horizon of 28 years before retirement, as it lets investors be more aggressive in their investments in response to the fact that they have plenty of time to recover from any short-term downticks in the markets.

In particular, Vanguard Target Retirement 2045 has allocations to the following four Vanguard mutual funds:

Fund

Percentage

Vanguard Total Stock Market Index Fund

54%

Vanguard Total International Stock Index Fund

36%

Vanguard Total Bond Market II Index Fund

7.1%

Vanguard Total International Bond Index Fund

2.9%

Data source: Vanguard Group.

How much does the fund cost?

Vanguard Target Retirement 2045 has no loads or other upfront fees. Annual expense ratios are 0.16%, or $16 per year for every $10,000 invested in the fund. Investors have to have an initial investment of $1,000 per Vanguard's rules, which apply to regular taxable accounts, as well as IRA or other specialized account types.

How much income does the fund provide?

With a target date of 2045, income is a secondary consideration for the fund, and capital appreciation is more important. It will take time for that focus to shift because the typical investor's time horizon is so long.

That's not to say that the fund provides no income right now. The current yield of just over 2% represents the stock market's overall income from dividends, as well as the tiny contribution that fixed-income investments make. The fund makes distributions of its income and capital gains every year, and if the current rising interest rate environment continues, then income levels might climb over time.

Is Vanguard Target Retirement 2045 right for you?

As with all of Vanguard's target date funds, the 2045 fund is simple, but it has its shortcomings. You can always simply buy the Vanguard mutual funds that the 2045 fund owns yourself, and doing so gives you lower expenses of just 0.04% to 0.12% per year. You won't get automatic asset allocation adjustments that way, but the more money you have, the more you can save by taking matters into your own hands.

You also need to understand how the Vanguard asset allocation process will work over the course of your lifetime. Even after you retire, you can expect the target fund still to have significant allocations in stocks. That came as a surprise to many in the 2008 financial crisis, as they mistakenly believed that a target date fund would have 0% stock exposure at or just before its target date. Because growth is still vital to a portfolio even after you retire, having some stocks is smart, but you need to know about that and appreciate the risk.

For those looking for an easy way to save toward a retirement in or around 2045, Vanguard Target Retirement 2045 is a solid choice. The fund offers simplicity, diversification, and low costs, and that's what many retirement savers need as they consider their options for the future.

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.