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.
Sign up for Kiplinger’s Free E-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
-
Nvidia Stock Up After President Trump Revokes Biden AI OrderNvidia stock is higher Tuesday after President Trump revoked a 2023 executive order targeting AI developers. Here's what we know.
-
Apple Stock Slapped With Another Sell Rating: What to KnowThe latest Apple stock downgrade centers around iPhone sales and the weakening consumer electronics market. Here's what investors need to know.
-
Getting Divorced? Beware of Hidden Tax Traps as You Divide AssetsDividing assets fairly in a divorce means looking beyond their current values and asking whether they'll create tax liabilities — or tax breaks — in the future.
-
A Social Security Storm Is Gathering: Here's Your Safety PlanIf Social Security reserves are depleted by 2033, as predicted, future benefits could be cut by as much as 21%. Here’s how to weather the impending storm.
-
How to Avoid These 10 Retirement Planning MistakesMany retirement planning mistakes are easily avoidable. Here are 10 to have on your radar so you don't end up running out of money in your golden years.
-
Before the Next Time Markets Sink, Do Your Lifeboat DrillsAn eventual market crash is inevitable. We can't predict when, but preparing for the ups and downs of investing is imperative. Here's what to do.
-
This Late-in-Life Roth Conversion Opportunity Spares Your HeirsExpensive medical care in the later stages of life is an unpleasant reality for many, but it can open a window for a Roth conversion that benefits your heirs.
-
Women, What Is Your Net Worth?Many women have no idea what their net worth is, or even how to calculate it. Many also turn to social media finfluencers for advice. Here's what to do instead.
-
Medicare’s 2025 Drug Negotiation List Includes Ozempic and WegovyThe Centers for Medicare & Medicaid Services wants to lower the cost for 15 more drugs including Ozempic and Wegovy.
-
Can You Get a Mortgage In Retirement? And Should You?With interest rates still stubbornly high and home prices elevated, here’s how a retiree living on a fixed income can land a decent mortgage.
