Target date vs. Lifestrategy fund

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Target date vs. Lifestrategy fund

Postby sari » Tue Jul 16, 2013 9:24 pm

I have a SEP IRA and a 401K which are both in actively managed portfolios. I will be moving the 401K from a managed account into all index funds. I'm considering the Vanguard Target Date Fund or the Lifestrategy fund. Is it wise to roll the SEP IRA into the new 401K plan? Retirement is 21-25 years away. Which fund (target vs. lifestrategy, which year or allocation) would you advise if I have other income to tap into during retirement? Thank you in advance.

https://personal.vanguard.com/us/funds/ ... torder=asc
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Re: Target date vs. Lifestrategy fund

Postby Peter Foley » Tue Jul 16, 2013 11:23 pm

Either would be fine, but there is a difference. A target retirement fund adjusts its asset allocation to be more conservative over time. The lifestrategy fund makes adjustments to retain the same asset allocation over time.

The one you choose is a matter of personal perference; both are fine approaches. As to which fund, we would have to know what asset allocation stock% to bond% that you feel comfortable with.

There is no reason not to put your SEP in the 401k plan if the expenses for the investment options are low. If your choices are Vanguard funds you are likely to have a number of good low cost options.
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Re: Target date vs. Lifestrategy fund

Postby LAlearning » Tue Jul 16, 2013 11:47 pm

Would probably work better to keep all your posts under the same thread so people can see the options.
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Re: Target date vs. Lifestrategy fund

Postby sari » Wed Jul 17, 2013 7:57 am

The expense ratio for the Wellington fund is also low. Is this a better option over Target or Lifestrategy? I've read in numberous places that actively managed funds in most cases do not beat the index.
https://personal.vanguard.com/us/funds/ ... IntExt=INT
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Re: Target date vs. Lifestrategy fund

Postby bUU » Wed Jul 17, 2013 8:35 am

Isn't Wellington effectively just an actively-managed life strategy fund?
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Re: Target date vs. Lifestrategy fund

Postby Taylor Larimore » Wed Jul 17, 2013 9:04 am

Bogleheads:

Vanguard has this article comparing the Target and LifeStrategy funds:

https://personal.vanguard.com/us/conten ... ompare.jsp

Our WIKI has another good comparison:

http://www.bogleheads.org/wiki/LifeStra ... ment_Funds

Important: Knowledgeable investors never use the name or date for selecting a fund-of-funds. Instead, select a Target or LifeStrategy fund with its stock/bond allocation similar to your asset-allocation plan.

Best wishes
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Re: Target date vs. Lifestrategy fund

Postby ofcmetz » Wed Jul 17, 2013 9:27 am

sari wrote:The expense ratio for the Wellington fund is also low. Is this a better option over Target or Lifestrategy? I've read in numberous places that actively managed funds in most cases do not beat the index.
https://personal.vanguard.com/us/funds/ ... IntExt=INT



The Lifestrategy and Target Retirement series of funds are much more diversified that the Wellington Fund in my opinion. In addition to being index funds, they both contain large and small domestic and international equity. Both Index funds also are more diversified when it comes to bonds as well. Wellington is much more concentrated and actively managed. If I used Wellington I would use more than one fund which would lend to a more complex portfolio.
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Re: Target date vs. Lifestrategy fund

Postby zebrafish » Wed Jul 17, 2013 10:52 am

Is it wise to roll the SEP IRA into the new 401K plan?

It depends on your new 401k plan and the choices within this plan. If they stink, I would not roll into new 401k.

It also depends on your MAGI, whether you are wanting to make a Roth contribution, and whether you are eligible for a Roth. If you cannot make a Roth due to income and your only mechanism is a backdoor Roth, then rolling a SEP-IRA into a 401k might make sense to help avoid taxes on the trad IRA -> Roth conversion. More information is really necessary on this point.
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Re: Target date vs. Lifestrategy fund

Postby sari » Wed Jul 17, 2013 1:26 pm

I do not qualify for a Roth. The SEP IRA and current 401K are both in managed account earning about 6.5% before subtracting the 2% total fees. I am trying to combine both into an index fund in the new 401K setup (target vs. lifestrategy funds). Thank you.
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Re: Target date vs. Lifestrategy fund

Postby zebrafish » Wed Jul 17, 2013 7:31 pm

sari wrote:I do not qualify for a Roth. The SEP IRA and current 401K are both in managed account earning about 6.5% before subtracting the 2% total fees. I am trying to combine both into an index fund in the new 401K setup (target vs. lifestrategy funds). Thank you.


If you don't qualify for Roth due to income, then you could roll the SEP-IRA into your new employer 401k (assuming you like the choices). This should allow you to make a "backdoor" Roth with no taxes due.

I think having a 2% fee for someone to manage your money is ridiculous. Spend a little time reading, learning and decide whether you think that 2% fee is worth it or not. Over the long-term a 2% fee will take a huge chunk out of your investment earnings. It could decrease your nest egg by 1/3 or more. Most people here have made the decision to self-educate, manage their own money, and not pay an advisor. You need to decide what is good for you and worth your money.
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Re: Target date vs. Lifestrategy fund

Postby sari » Wed Jul 17, 2013 8:40 pm

I'm the employer so I am working with employee fiduciary to move our portfolio to index funds. Interestingly, my 4 employees have all selected the vanguard's target date funds based on the fund's allocations and not the retirement date (I learned this here). I have not rolled my 401K into a Roth 401K because I expect my income to be less during retirement and hopefully a lower tax bracket.
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Re: Target date vs. Lifestrategy fund

Postby CWRadio » Tue Jun 24, 2014 11:21 am

Why does Target Retirement Income (VTINX) outperform LifeStratery Income (VASIX)?
Thanks Paul
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Re: Target date vs. Lifestrategy fund

Postby Index Fan » Tue Jun 24, 2014 11:39 am

Target Retirement Income is 30/70 stocks/bonds, LifeStrategy Income is 20/80 stocks/bonds.
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