Vanguard Target Retirement Fund Crash – December 2021

On December 29th, 2021 Vanguard Target Retirement Funds all dropped in share price by as much as 14% in a single day. In this article I break down what happened, how it impacts you, and why it happened.


  • The share price of Vanguard Target Retirement Funds dropped by as much as 14% on 12/29/2021
  • The underlying funds remained flat on that day
  • This was caused by a large capital gains payout
  • Investors’ total investment value wasn’t impacted
  • This may impact investors taxes if the fund is held in a taxable account
  • Make sure dividend reinvestment is turned on

What Happened?

If you own a Vanguard Target Retirement Fund and you looked at your returns after 12/29/2021 you likely saw a huge drop in the share price. For example, here’s the daily return of the fund VFIFX showing an 11.34% drop:

This fund is made up of just five underlying funds as shown on the mutual fund details page and below:

A target date fund is just a “fund of funds” so it should behave as a weighted average of the underlying funds. But if we look at how those funds fared on the same day, they were all almost perfectly flat, while the