Capital Group sets 4% to 5.5% withdrawal range for target-date funds

Capital Group renamed its 2010 through 2025 target-date funds to include “retirement income,” pointing the series at the spending phase. With the renames it published a framework modeling fixed annual withdrawals of 4% to 4.5% and variable withdrawals of 5% to 5.5% over a 30-year retirement.

For plan advisers, that turns part of a lineup review into arithmetic. A committee weighing Capital Group's series has a published spending range to set beside a competitor's glide path. Morgan Stanley's poll of 200 sponsors found 69% rank the adviser a top lineup resource, which puts the framing of that comparison in the adviser's hands.

Vanguard is taking a different route: it plans Target Retirement Growth Trusts, a collective investment trust series built on its existing Target Retirement foundation, with higher equity allocations throughout the glide path. Fee levels, a launch date and whether the trusts supplement or replace the existing Target Retirement series have not been disclosed.

The structural difference matters for a lineup file. Capital Group's change is a rename of funds already in use; Vanguard's is a trust series that does not yet exist at a published price.

Until Vanguard discloses a fee and a start date, the comparison stops at the glide path.

Capital Group's ranges come from a published framework, not from a new share class or a different asset mix. The 4% to 4.5% band covers fixed annual withdrawals; the 5% to 5.5% band covers variable withdrawals that move with markets. Both are modeled over 30 years, the horizon that separates a target-date holder's accumulation years from the decades of spending that follow.

Vanguard's trusts keep more equity in the mix throughout the glide path, which is the opposite bet on the same problem: a portfolio that stays growth-oriented longer relies on returns to fund later spending rather than on a stated withdrawal schedule. Neither approach is self-evidently the right default for a given plan, and the source material does not offer performance or drawdown data to settle it.

The practical gap for advisers is information. A committee can read Capital Group's withdrawal bands today and test them against participant balances and expected Social Security income; it cannot do the same for Vanguard until the trusts have a price and a start date. On a lineup calendar, that makes one a review item and the other a place holder.