Just to be clear, though, you should have the option to direct Vanguard to re-invest those dividends, I think. I'm not familiar with them as a 401K provider.
Yes, this is true. They should be set to automatically reinvest, but worth checking.
So basically this is all just for tax purposes (for anyone investing in taxable accounts). Otherwise this particular fund would most likely not make any distributions because it is designed for retirement 30 years from now.
Dividends throughout year -> automatically reinvested into fund -> total is distributed at year-end to show IRS Dividends & Capital Gain amounts (if you were in a taxable account) -> most likely auto-reinvested in the fund (again)
@ Pizza, The OP is invested in the Vanguard 2050 Fund.
Understand, but through a 401k. For example, when I researched my 457 (because while it was holding a vanguard fund,the share price and share price appretiation didnt match the data I got from vanguard) I found out their structure was actually to hold the vanguard funds in an intermediary trust.
I mentioned this in case someone held say, VTI in a 401k, but noticed that their share price growth was slightly different that of VTI, as reported in public disclosures. Most plan admins and company reps would not be able to explain why the share prices might not match.
In my case, I was just anal enough to ask why the share prices were reported differently in my plan and then I dug into disclosures until I got a solid answer. Interestingly, this is all required to be reported, as well as additional trust costs, but is usually burried deep within a specific financial report. It is very likely not material to performance, but can add a small bit of cost.
My specific example comes from IMCA-RC, a popular provider of govt 457 plans.