The Securities and Exchange Commission (SEC) announced Friday that The Vanguard Group, one of the world's biggest asset managers, will pay a $106.4 million fine to settle charges for "misleading statements related to capital gains distributions and tax consequences" for individuals that invested in its Vanguard Investor Target Retirement Funds (TRF) in taxable accounts.
The SEC found that in December 2020, Vanguard lowered the minimum investment for its lower-expense Institutional TRFs, to $5 million from $100 million. This prompted many retirement plan investors to sell shares of the Investor TRFs and switch to institutional target-date funds.
However, this triggered capital gains taxes for those sellers. Furthermore, retail investors who remained in the Investor TRFs faced larger capital gains distributions and tax liabilities and missed out on potential growth.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"Materially accurate information about capital gains and tax implications is critical to investors saving for their retirements," said Corey Schuster, chief of the Division of Enforcement's asset management unit, in a statement. "Firms must ensure that they are accurately describing to investors the potential risks and consequences associated with their investments."
Vanguard agreed to the $106.4 million in penalties and relief to affected investors without admitting or denying the allegations. This is in addition to a $40 million settlement it agreed to pay to settle a class action lawsuit.
What is a target-date fund?
As Kiplinger contributor and investment adviser representative Tony Drake, CFP, explains in his piece on "Is a Target-Date Fund Right for You?," target-date funds "are mutual funds, based on the year the saver plans to retire.
"The target-date fund is actively managed for the rest of your life, rebalancing to adjust risk as you get older and closer to retirement," Drake explains. However, there are several factors to consider when selecting a target-date fund, including diversification, fees, risk and asset allocation, he writes.
If you're in the market for a target-date fund or just want to know what your options are, here are six target-date funds to buy for your retirement, courtesy of Nellie Huang, senior associate editor of Kiplinger Personal Finance Magazine.
Related Content
-
Original Medicare vs Medicare Advantage Quiz: Which is Right for You?Quiz Take this quick quiz to discover your "Medicare Personality Type" and learn whether you are a Traditionalist, or a Bundler.
-
Ask the Editor: Capital Gains and Tax PlanningAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers questions on capital gains tax rates and end-of-year tax planning
-
Time Is Running Out to Make the Best Tax Moves for 2025Don't wait until January — investors, including those with a high net worth, can snag big tax savings for 2025 (and 2026) with these strategies.
-
Original Medicare vs Medicare Advantage Quiz: Which is Right for You?
Quiz Take this quick quiz to discover your "Medicare Personality Type" and learn whether you are a Traditionalist, or a Bundler.
-
Time Is Running Out to Make the Best Moves to Save on Your 2025 Taxes
Don't wait until January — investors, including those with a high net worth, can snag big tax savings for 2025 (and 2026) with these strategies.
-
4 Smart Ways Retirees Can Give More to Charity, From a Financial AdviserFor retirees, tax efficiency and charitable giving should go hand in hand. After all, why not maximize your gifts and minimize the amount that goes to the IRS?
-
My Adult Child Was Laid Off. Can We Discuss It Without Ruining the Holidays?We asked mental health and financial experts for advice.
-
3 Year-End Tax Strategies for Retirees With $2 Million to $10 MillionTo avoid the OBBB messing up your whole tax strategy, get your Roth conversions and charitable bunching done by year's end.
-
'Politics' Is a Dirty Word for Some Financial Advisers: 3 Reasons This Financial Planner Vehemently DisagreesYour financial plan should be aligned with your values and your politics. If your adviser refuses to talk about them, it's time to go elsewhere.
-
For a Move Abroad, Choosing a Fiduciary Financial Planner Who Sees Both Sides of the Border Is CriticalWorking with a cross-border financial planner is essential to integrate tax, estate and visa considerations and avoid costly, unexpected liabilities.
-
15 Costly Drugs Will Get Medicare Price Cuts in 2027: Will You Save?The Centers for Medicare & Medicaid Services extended a safety net to older Americans by announcing significant price reductions on 15 high-cost prescription drugs, effective in 2027.
