Did you get hit with a Massive Tax Bill for Vanguard Target Retirement Funds? 

Vanguard Target Retirement Funds claim to offer a diversified portfolio within a single fund that adjusts its underlying asset mix over time. These are bundles of stocks, bonds and cash that automatically become more conservative as investors approach their retirement date. 

According to the WSJ’s Intelligent Investor, most of the money in Vanguard’s target funds comes from corporate and individual retirement plans, where funds’ gains and income aren’t currently taxable. However, some investors who put nonretirement money into Vanguard’s Target Retirement 2035 and Target Retirement 2040 funds got a “nasty surprise,” in December.  These funds reportedly distributed approximately 15% of their total assets as capital gains, which are taxable outside of retirement accounts. Unfortunately, this has resulted in huge tax bill for some investors.  

According to the article, this happened because “big clients left little ones holding the bag.” Vanguard’s target funds come in more than one format. The smaller clients get the standard version but big clients like corporate retirement plans get an institutional version with identical holdings at a lower fee. 

Vanguard reportedly reduced the minimum investment in its institutional Target Retirement funds to $5 million from $100 million at the end of 2020. This resulted in multimillion-dollar corporate retirement plans switching the institutional equivalents.  Their sales reportedly caused the funds to offload some holdings, which triggered capital gains for the group of investors who were left. 

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This information is publicly available and provided to you by The White Law Group.  

If you are concerned about your investments in Vanguard Target Retirement 2035 and Vanguard Target Retirement 2040 funds, the securities attorneys at The White Law Group may be able to help you. For a free consultation, please call the offices at 888-637-5510.  

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington. The firm represents investors throughout the country in claims against their brokerage firms.  

For more information on the firm and its representation of investors, visit www.WhiteSecuritiesLaw.com.