Prepare to be shocked. Per the prospectus:
Quote:
According to an agreement between the Target Retirement Funds and Vanguard, the
Funds’ expenses will be offset by a reimbursement from Vanguard for (1) the Funds’
contributions to the costs of operating the underlying Vanguard funds in which the Target
Retirement Funds invest, and (2) certain savings in administrative and marketing costs that
Vanguard expects to derive from the Funds’ operation.
The Funds’ trustees believe that the reimbursements should be sufficient to offset most,
if not all, of the expenses incurred by the Funds. As a result, each Fund is expected to
operate at a very low or zero expense ratio. Since their inception in 2003, the Funds, in fact,
have incurred no direct net expenses.
Although the Target Retirement Funds are not expected to incur any net expenses
directly, the Funds’ shareholders indirectly bear the expenses of the underlying Vanguard
funds. The expense ratios for the Investor Shares of each of the underlying funds during
the Target Retirement Funds’ 2005 fiscal year were...(table omitted)
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In other words, you're only paying for the weighted expense ratio of the underlying funds -- roughly 0.2%. Granted, that could change, but I doubt Vanguard will let it happen because they'd lose a lot of investors in these funds.