Should I switch my target date fund to low-cost ETFs instead?
Hey everyone,
I've had my 401k entirely in a Vanguard 2050 target date fund (VFIFX) for the past 5 years. I'm 35 and pretty hands-off with investing, which is why I chose it. But lately, I've been learning more about ETFs, and I'm wondering if I should make a switch.
The main thing that caught my attention was the expense ratio - I'm paying 0.08% for the target date fund, but I could potentially pay even less with something like VTI (0.03%) and VXUS (0.07%) for international exposure.
I'm comfortable managing my own portfolio, but I want to make sure I'm not overthinking this or missing any important factors. Would love to hear from others who've made this switch or decided to stick with target date funds.
1 Answer
You're already doing quite well by investing in a low-cost Vanguard target date fund (VFIFX) and sticking with it consistently — that's better than what many investors manage.
You’re not missing anything major. VFIFX is a solid, well-diversified fund that automatically adjusts over time and requires no maintenance. The difference in fees is marginal: with $100,000 invested, switching to a DIY ETF approach like VTI (0.03%) and VXUS (0.07%) would save you around $50–60 a year — not a huge amount unless your portfolio is much larger.
If you’re comfortable managing your own allocation and rebalancing once or twice a year, switching could make sense for slightly more control and lower fees. But if you value simplicity there’s nothing wrong with sticking with VFIFX either.