What fund to pick for retired Mom

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Bluemnatra
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What fund to pick for retired Mom

Post by Bluemnatra »

My mom received a lump sum $90k from an insurance payout and has decided to invest it with Chase in JPMorgan Income Builder Fund Class C Shares (JNCBX). After talking to her we opened her a Vanguard account and had it transferred from Chase to Vanguard. My mom is 65 and healthy and she has no current need to use the money. She has no debts. No mortgage. It will be in a taxable account. I was thinking of Vanguard Balanced Index Fund Admiral Shares (VBIAX). She wants no maintenance and I just think one fund for her is best. Any other recommendations or am I on the right path?
Makefile
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Re: What fund to pick for retired Mom

Post by Makefile »

That one is US only.
LifeStrategy Moderate Growth would be a similar allocation that includes international.
Da5id
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Re: What fund to pick for retired Mom

Post by Da5id »

Bluemnatra wrote: Tue Jun 22, 2021 7:09 pm My mom is 65 and healthy and she has no current need to use the money. She has no debts. No mortgage. It will be in a taxable account. I was thinking of Vanguard Balanced Index Fund Admiral Shares (VBIAX). She wants no maintenance and I just think one fund for her is best. Any other recommendations or am I on the right path?
Any visibility at all about when the money might be needed (as in a few years vs probably never)? And what her risk tolerance may be?

I think VBIAX is fine, though I'd personally prefer LifeStrategy Moderate Growth (VSMGX).
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retired@50
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Re: What fund to pick for retired Mom

Post by retired@50 »

Regardless of whether you pick the LifeStrategy fund or the Vanguard Balanced Index fund, it's a HUGE improvement.

Reading the description for JNBCX on Yahoo! Finance reveals the following:

Expense ratio 1.25%
The investment seeks to maximize income while maintaining prospects for capital appreciation. The fund has significant flexibility to achieve its investment objective and invests in a broad range of income-producing securities, including debt and equity securities in the U.S. and other markets throughout the world, both developed and emerging. There is no limit on the number of countries in which the fund may invest, and the fund may focus its investments in a single country or a small group of countries. It may invest up to 100% of its total assets in debt securities and other types of investments that are below investment grade.
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Stinky
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Re: What fund to pick for retired Mom

Post by Stinky »

You did a wonderful thing for your mother by moving from Chase to Vanguard.

Almost regardless of which VG fund you pick, your mother will likely save tens of thousands of dollars in mutual fund expenses over the years.
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ClevrChico
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Re: What fund to pick for retired Mom

Post by ClevrChico »

VBIAX or VSMGX are both fine choices.
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Re: What fund to pick for retired Mom

Post by Wiggums »

Stinky wrote: Tue Jun 22, 2021 7:41 pm You did a wonderful thing for your mother by moving from Chase to Vanguard.

Almost regardless of which VG fund you pick, your mother will likely save tens of thousands of dollars in mutual fund expenses over the years.
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Re: What fund to pick for retired Mom

Post by tomsense76 »

As the OP mentioned this will live in taxable, would make the following observations about VBIAX's contents:

* Bonds that will generate ordinary income (admittedly yields are likely pretty low)
* Foreign stocks which have large, partially unqualified dividends (doesn't qualify for foreign tax credit)

This may not be a big deal, but it is worth being aware of in taxable.

Another consideration if taxes are a concern would be Vanguard Tax-Managed Balanced Fund (VTMFX). This fixes the issues above by containing:

* Munis that are Federally tax-exempt (may still have state tax depending)
* Domestic stocks with smaller dividends that are nearly all qualified (so lower tax rate)
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Bluemnatra
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

She doesn’t file taxes. Lives on social security. She doesn’t need it any time soon she says. She’s plenty of cash in an Ally account I opened for her, again from chase. She said if I can withdraw $200-$300 a month eventually that’s be enough. Maybe a vacation every once in a while.
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Re: What fund to pick for retired Mom

Post by Outer Marker »

Both Vanguard Balanced fund and Lifestrategy Mod Growth are fine choices. Looking in the rearview mirror, $10,000 in the Balanced Fund grew to $26,000, whereas $10,000 in Lifestrategy grew to $22,000. Of course no one knows what the future holds, but I think I'd go with the Balanced Fund. There's some comfort in big US companies for older, less experienced investors, and I've never had much appetite for foreign bonds.
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Re: What fund to pick for retired Mom

Post by delamer »

Other than her cash at Ally, does she have any liquid assets?
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Bluemnatra
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

delamer wrote: Tue Jun 22, 2021 10:26 pm Other than her cash at Ally, does she have any liquid assets?
Negative
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Re: What fund to pick for retired Mom

Post by delamer »

Bluemnatra wrote: Tue Jun 22, 2021 11:37 pm
delamer wrote: Tue Jun 22, 2021 10:26 pm Other than her cash at Ally, does she have any liquid assets?
Negative
Assuming that she has total assets in the low $100,00’s, don’t put more than 25% or so in equities. She just isn’t in a position to take much risk. But having some stocks will give her inflation protection.

The LifeStrategy income Fund would work.

Or an S&P 500 fund plus a Treasuries or TIPS funds.
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Bluemnatra
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

She does have $40k in cash that she does not need and I’m wondering if we should invest that for her as well? I was figuring she should have 36 months worth of living expenses in cash in the event the market took a down turn and she needed to wait for it to recover. Isn’t 25% in equities to low to provide growth if she wants a 4% withdrawal rate? She also wants simple and she has granted me full agent authorization to help manage the account because she has zero interest or knowledge in AA or rebalancing so in the event something happened to me I wanted it to be as simple as possible for her.
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Re: What fund to pick for retired Mom

Post by dbr »

Bluemnatra wrote: Wed Jun 23, 2021 9:27 am She does have $40k in cash that she does not need and I’m wondering if we should invest that for her as well? I was figuring she should have 36 months worth of living expenses in cash in the event the market took a down turn and she needed to wait for it to recover. Isn’t 25% in equities to low to provide growth if she wants a 4% withdrawal rate?
I don't think 4% withdrawal applies to a situation like this. Your post says she has no need for more income. It would be good to compare the $4000/year that 4% represents to what her income and spending otherwise is.

What is true is that if her total assets are about $135,000 then it is probably more important to see that money as a reserve than as a source of spending. Portfolios small relative to income and spending are really emergency funds in function. That doesn't mean she can't spend some of the money if she wants or needs.

I think somewhere around a 30/70 balanced fund is probably suitable for protecting the asset from a stock crash while still participating a little in longer term market growth.
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Re: What fund to pick for retired Mom

Post by delamer »

Bluemnatra wrote: Wed Jun 23, 2021 9:27 am She does have $40k in cash that she does not need and I’m wondering if we should invest that for her as well? I was figuring she should have 36 months worth of living expenses in cash in the event the market took a down turn and she needed to wait for it to recover. Isn’t 25% in equities to low to provide growth if she wants a 4% withdrawal rate?
If she has $130,000 total, then a 4% withdrawal rate is about $430/month. As dbr indicated, you said initially that she doesn’t need to make any withdrawals but then you said she wants to withdraw $200 to $300 per month “eventually.”

You can put $40,000 in a S&P 500 fund, $40,000 in Ally (and or CD ladder), and the rest in TIPS/Treasuries. That would give her 30%, 30%, and 40%.

The main point is that with a small nest egg, risk/volatility should be minimized.
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Bluemnatra
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

delamer wrote: Wed Jun 23, 2021 9:40 am
Bluemnatra wrote: Wed Jun 23, 2021 9:27 am She does have $40k in cash that she does not need and I’m wondering if we should invest that for her as well? I was figuring she should have 36 months worth of living expenses in cash in the event the market took a down turn and she needed to wait for it to recover. Isn’t 25% in equities to low to provide growth if she wants a 4% withdrawal rate?
If she has $130,000 total, then a 4% withdrawal rate is about $430/month. As dbr indicated, you said initially that she doesn’t need to make any withdrawals but then you said she wants to withdraw $200 to $300 per month “eventually.”

You can put $40,000 in a S&P 500 fund, $40,000 in Ally (and or CD ladder), and the rest in TIPS/Treasuries. That would give her 30%, 30%, and 40%.

The main point is that with a small nest egg, risk/volatility should be minimized.

Thank you. I will try and ask her again what she means by “eventually”, if I recall 5 years was her answer. Is the vanguard TIPS the VIPSX ticker?
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Re: What fund to pick for retired Mom

Post by ruralavalon »

Vanguard Balanced Index Fund Admiral Shares (VBIAX) is an excellent choice in my opinion.
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Re: What fund to pick for retired Mom

Post by galawdawg »

I'd also recommend that you and she consider Vanguard Target Retirement Income (VTINX). https://investor.vanguard.com/mutual-fu ... file/VTINX

As far as the cash, does she rely upon her savings and investments to meet (in part or in full) her retirement spending needs? If so, how much does she require per month to supplement SS income and/or any pension or other income source? Does she own a vehicle or a house which would require funds in the event of a repair issue?
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

galawdawg wrote: Wed Jun 23, 2021 10:53 am I'd also recommend that you and she consider Vanguard Target Retirement Income (VTINX). https://investor.vanguard.com/mutual-fu ... file/VTINX

As far as the cash, does she rely upon her savings and investments to meet (in part or in full) her retirement spending needs? If so, how much does she require per month to supplement SS income and/or any pension or other income source? Does she own a vehicle or a house which would require funds in the event of a repair issue?
She currently does not rely on her savings or investments to meet her spending needs. She is relying currently on SS. She lives with me in a granny flat. She owns a car. She has no debts. She has no other sources of income besides SS. She recently settled the estate of her husband and that is the final income she will receive besides SS. She was collecting around $300 month for rental property she owned as part of the estate, but will no longer receive that. Hence why she would like to supplement that with her retirement monies.
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Re: What fund to pick for retired Mom

Post by dbr »

Bluemnatra wrote: Wed Jun 23, 2021 11:13 am
galawdawg wrote: Wed Jun 23, 2021 10:53 am I'd also recommend that you and she consider Vanguard Target Retirement Income (VTINX). https://investor.vanguard.com/mutual-fu ... file/VTINX

As far as the cash, does she rely upon her savings and investments to meet (in part or in full) her retirement spending needs? If so, how much does she require per month to supplement SS income and/or any pension or other income source? Does she own a vehicle or a house which would require funds in the event of a repair issue?
She currently does not rely on her savings or investments to meet her spending needs. She is relying currently on SS. She lives with me in a granny flat. She owns a car. She has no debts. She has no other sources of income besides SS. She recently settled the estate of her husband and that is the final income she will receive besides SS. She was collecting around $300 month for rental property she owned as part of the estate, but will no longer receive that. Hence why she would like to supplement that with her retirement monies.
What you really mean is that she DOES need to rely on her investments for income to the tune of $300/mo.

So it could be a plan that she wants to rely on a safe rate of withdrawal from $130k. At a budget of $3600/year that is doable with about any stock allocation in terms of withdrawal rate analysis, withdrawal rate less than 3%.

A concern is that there should also be some reserve for larger or unanticipated expenses.

I don't know why the balanced fund you suggested would not be fine, or one of the life strategy funds at 40/60 or thereabouts. You and she should think through how you would feel if 20% of that portfolio disappears in a short time with no evidence of coming back.

An SPIA bought today at age 65 would deliver $300/mo. not inflation indexed for a cost of about $65k. That is a payout rate of 5.5% guaranteed for life but not inflation indexed. I am not sure it would be wise to add more annuity to existing SS when the portfolio is small. It is just something to be aware of. Also at low current interest rates an SPIA is expensive.
Last edited by dbr on Wed Jun 23, 2021 11:35 am, edited 1 time in total.
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Re: What fund to pick for retired Mom

Post by galawdawg »

In that case, unless her car is a newer model and under warranty, I'd suggest retaining about $5k in a savings account in the event a substantial vehicle repair is necessary, that way she doesn't have to withdraw from her investments for such an expense. Otherwise, invest all of her other cash and savings in Vanguard Target Retirement Index (VTINX, ER of 0.12%).

VTINX has returned an average of 5.65% annually since the inception of that fund in October 2003. Now that means that in some years the return will be lower and in some years, higher. In its worst year (2008), the fund declined 10.93%, but in its best year which followed (2009) it gained 14.26%. It has only had three (3) years in its seventeen (17) year history when it has declined (-10.93%, -1.99%, -0.17%) but in each of the following years it gained significantly. At an allocation of 30/70, the fund is as conservative as it gets while still providing income and growth, so it is well suited for even the most cautious investor.

I'd suggest turning off the option to reinvest distributions, those can be withdrawn since they are taxable when they are distributed even if reinvested. If your mom's checking account is linked to Vanguard as an external account, you can set up automatic withdrawals in an amount you and she choose to take place monthly (or whatever schedule you desire) and the funds would be automatically sent to the checking account. Here is a link to do that: https://personal.vanguard.com/us/Automa ... ion=change. On her taxable account, she may have some tax liability for dividends, capital gains distributions, and capital gains on shares sold, depending on her annual income.

Hope that provides some food for thought!
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

dbr wrote: Wed Jun 23, 2021 11:26 am
Bluemnatra wrote: Wed Jun 23, 2021 11:13 am
galawdawg wrote: Wed Jun 23, 2021 10:53 am I'd also recommend that you and she consider Vanguard Target Retirement Income (VTINX). https://investor.vanguard.com/mutual-fu ... file/VTINX

As far as the cash, does she rely upon her savings and investments to meet (in part or in full) her retirement spending needs? If so, how much does she require per month to supplement SS income and/or any pension or other income source? Does she own a vehicle or a house which would require funds in the event of a repair issue?
She currently does not rely on her savings or investments to meet her spending needs. She is relying currently on SS. She lives with me in a granny flat. She owns a car. She has no debts. She has no other sources of income besides SS. She recently settled the estate of her husband and that is the final income she will receive besides SS. She was collecting around $300 month for rental property she owned as part of the estate, but will no longer receive that. Hence why she would like to supplement that with her retirement monies.
What you really mean is that she DOES need to rely on her investments for income to the tune of $300/mo.

So it could be a plan that she wants to rely on a safe rate of withdrawal from $130k. At a budget of $3600/year that is doable with a stock allocation
Yes, if that were the case what is the best way to deploy her current $90k in JNCBX and the $40k in cash? Is VBIAX to much risk for her then? Will the Vanguard Target Retirement Income (VTINX) provide enough growth and income?
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

galawdawg wrote: Wed Jun 23, 2021 11:30 am In that case, unless her car is a newer model and under warranty, I'd suggest retaining about $5k in a savings account in the event a substantial vehicle repair is necessary, that way she doesn't have to withdraw from her investments for such an expense. Otherwise, invest all of her other cash and savings in Vanguard Target Retirement Index (VTINX, ER of 0.12%).

VTINX has returned an average of 5.65% annually since the inception of that fund in October 2003. Now that means that in some years the return will be lower and in some years, higher. In its worst year (2008), the fund declined 10.93%, but in its best year which followed (2009) it gained 14.26%. It has only had three (3) years in its seventeen (17) year history when it has declined (-10.93%, -1.99%, -0.17%) but in each of the following years it gained significantly. At an allocation of 30/70, the fund is as conservative as it gets while still providing income and growth, so it is well suited for even the most cautious investor.

I'd suggest turning off the option to reinvest distributions, those can be withdrawn since they are taxable when they are distributed even if reinvested. If your mom's checking account is linked to Vanguard as an external account, you can set up automatic withdrawals in an amount you and she choose to take place monthly (or whatever schedule you desire) and the funds would be automatically sent to the checking account. Here is a link to do that: https://personal.vanguard.com/us/Automa ... ion=change. On her taxable account, she may have some tax liability for dividends, capital gains distributions, and capital gains on shares sold, depending on her annual income.

Hope that provides some food for thought!
Yes thank you very much.
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Re: What fund to pick for retired Mom

Post by galawdawg »

Bluemnatra wrote: Wed Jun 23, 2021 11:32 am Yes, if that were the case what is the best way to deploy her current $90k in JNCBX and the $40k in cash? Is VBIAX to much risk for her then? Will the Vanguard Target Retirement Income (VTINX) provide enough growth and income?
If she keeps $10k in savings and invests the remainder in VTINX, with the historic average return of about 5.5%, she could withdraw $750 per month and the funds would last her for thirty (30) years. At the same historic average return and a withdrawal rate of just $300 per month, at the end of thirty (30) years she'd have over $400k remaining!

And even if we drop the rate of return to 2.5% per year, with a monthly withdrawal rate of $300 per month, her portfolio would still be over $120k in thirty years. Therefore, I don't believe she has the need for the additional risk that a higher stock allocation would present. Additionally, as she is not accumulating and investing with a decades long horizon but is instead currently withdrawing and spending, I don't believe she has the ability to take on the additional risk posed by VBIAX and other funds with a higher stock allocation.

This chart from Vanguard may be helpful: https://investor.vanguard.com/investing ... allocation
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Re: What fund to pick for retired Mom

Post by dbr »

Bluemnatra wrote: Wed Jun 23, 2021 11:32 am
dbr wrote: Wed Jun 23, 2021 11:26 am
Bluemnatra wrote: Wed Jun 23, 2021 11:13 am
galawdawg wrote: Wed Jun 23, 2021 10:53 am I'd also recommend that you and she consider Vanguard Target Retirement Income (VTINX). https://investor.vanguard.com/mutual-fu ... file/VTINX

As far as the cash, does she rely upon her savings and investments to meet (in part or in full) her retirement spending needs? If so, how much does she require per month to supplement SS income and/or any pension or other income source? Does she own a vehicle or a house which would require funds in the event of a repair issue?
She currently does not rely on her savings or investments to meet her spending needs. She is relying currently on SS. She lives with me in a granny flat. She owns a car. She has no debts. She has no other sources of income besides SS. She recently settled the estate of her husband and that is the final income she will receive besides SS. She was collecting around $300 month for rental property she owned as part of the estate, but will no longer receive that. Hence why she would like to supplement that with her retirement monies.
What you really mean is that she DOES need to rely on her investments for income to the tune of $300/mo.

So it could be a plan that she wants to rely on a safe rate of withdrawal from $130k. At a budget of $3600/year that is doable with a stock allocation
Yes, if that were the case what is the best way to deploy her current $90k in JNCBX and the $40k in cash? Is VBIAX to much risk for her then? Will the Vanguard Target Retirement Income (VTINX) provide enough growth and income?
At the rate of withdrawal you are suggesting you don't need the higher stock allocation of 60% in VBIAX. Whether or not that is too much risk only you and she can say. A rule of thumb test for that is to ask how painful it would be to lose 30% of her assets.

You have a contradiction in terms when you ask for both growth and income. The basic premise of using a portfolio safely for income is that in the worst case the portfolio is spent down. If you want both growth and income you have to reduce the rate of withdrawal, possibly less than $300/mo and invest at maybe 50/50. But that is the worst case. In the real world conservative withdrawal rates from middle of the road asset allocations do grow most of the time.

I really don't think agonizing over 30/70 to 70/30 is worth it. The possible outcomes for all of those are uncertain and overlap tremendously. If I were in your mother's position I would probably put the money in a Life Strategy fund at 40/60 and make sure I am budgeting less than 3% withdrawal, the latter motivated by the idea the assets should grow. If I really wanted to maximize spending I would probably invest at 60/40 and withdraw at 5% and take my chances. That would assume that running out of money eventually is fine. You should also recognize that as time goes on you have more information about what is happening and you can adjust.

I still say you both need to think about where the reserve is for unanticipated needs and also how eldercare might be financed, if it comes to that. It is a possible argument that this money should not be invested at all but left in secure savings. $3600/year out of $130,000 would still take 36 years to spend, ignoring inflation.
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Re: What fund to pick for retired Mom

Post by delamer »

Big picture, if she wants to keep the $40,000 at Ally in cash then the Balanced Fund is a good option for the rest.

If she is comfortable with less at Ally, then she shouldn’t go with as high a percentage in stocks in the remainder of her nest egg.

Shoot for 25% to 35% in stocks for the entire $130,000. That way her downside is in the range of 15%, give or take.
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Bluemnatra
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

Thanks for all the advice. I think we’re going to invest her in VTINX. She wants to put in the $130,000 in VTINX and she has $30k she will leave in Ally for emergencies.
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Re: What fund to pick for retired Mom

Post by lakpr »

May I suggest you consider I bonds for part of the money? $130k in VTINX is $90k in bonds and $40k in stocks. I suggest investing $70k in bonds and $40k in stocks, closer to a 40:60 allocation, which is the AA for VSCGX (Vanguard Life Strategy Conservative Growth). The remaining $20k have your mother buy I bonds for $10k this year and $10k next year. The dividends from VSCGX that she does not need can be used to buy I bonds in year 3 and so on.

Your overall allocation remains exactly the same as investing everything in VTINX, but you will have insulated part of the money from default risk and counterparty risk inherent in investing in bonds.

I bonds will let you defer taxes on income until you cash the bond or 30 years, whichever occurs sooner. In your Mom's case, assuming you will consider this advice, it may be beneficial to elect to pay as you go, rather than paying taxes on all growth at the end.
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Bluemnatra
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

I didn’t realize how many good life strategy funds Vanguard has to choose from. I’m with fidelity, but mom wanted Vanguard. I think the key is to keep it simple for her and me so we like the idea of an all in one fund. I just want to help make the best decision for her and she definitely seems to lean on the more conservative side and when I told she could potentially withdrawal more than the $300 she said I’d be “rich” so she definitely doesn’t have an extravagant lifestyle. Her main things were being able to have money for travel and money for Christmas time to buy gifts for family. So now I’m stuck between VTINX and VSCGX. Is there going to be major impact with either of these two funds that would dramatically impact her?
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Re: What fund to pick for retired Mom

Post by ruralavalon »

Bluemnatra wrote: Wed Jun 23, 2021 10:27 pm Thanks for all the advice. I think we’re going to invest her in VTINX. She wants to put in the $130,000 in VTINX and she has $30k she will leave in Ally for emergencies.
I think that's a good choice.
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Re: What fund to pick for retired Mom

Post by lakpr »

Bluemnatra wrote: Thu Jun 24, 2021 9:14 am I didn’t realize how many good life strategy funds Vanguard has to choose from. I’m with fidelity, but mom wanted Vanguard. I think the key is to keep it simple for her and me so we like the idea of an all in one fund. I just want to help make the best decision for her and she definitely seems to lean on the more conservative side and when I told she could potentially withdrawal more than the $300 she said I’d be “rich” so she definitely doesn’t have an extravagant lifestyle. Her main things were being able to have money for travel and money for Christmas time to buy gifts for family. So now I’m stuck between VTINX and VSCGX. Is there going to be major impact with either of these two funds that would dramatically impact her?
If "one fund" is a REQUIREMENT, then I recommend VTINX than VSCGX. Since the former fund has only 30% in stocks, the max draw down in a 2008-style stock market meltdown would be 15% of the portfolio, or approximately $20k potential loss of principal. With VSCGX, that loss gets magnified to 20% of the portfolio, or approximately $26k potential loss of principal.

If she is open to having two different accounts, though -- one at Vanguard and one at Treasury Direct -- the potential loss of principal will still be only $20k. Money invested in I bonds is guaranteed to not lose value, but by the same token does not reward you much either. They are just guaranteed to keep pace with inflation, that's it.

So let me parry the question back at you -- how steadfast is that she must have all her investments in only ONE fund?
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ruralavalon
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Re: What fund to pick for retired Mom

Post by ruralavalon »

Bluemnatra wrote: Thu Jun 24, 2021 9:14 am I didn’t realize how many good life strategy funds Vanguard has to choose from. I’m with fidelity, but mom wanted Vanguard.

The lack of a broad range of good fixed allocation funds at Fidelity is one of their shortcomings, they have nothing like Vanguard LifeStrategy funds.

At Fidelity you can use ETFs like BlackRock iShares Core Allocation ETFs (AOK), (AOM), (AOR), (AOA), ER 0.25%, 30/70 to 80/20 allocations.


Bluemnatra wrote: Thu Jun 24, 2021 9:14 amI think the key is to keep it simple for her and me so we like the idea of an all in one fund. I just want to help make the best decision for her and she definitely seems to lean on the more conservative side and when I told she could potentially withdrawal more than the $300 she said I’d be “rich” so she definitely doesn’t have an extravagant lifestyle. Her main things were being able to have money for travel and money for Christmas time to buy gifts for family. So now I’m stuck between VTINX and VSCGX. Is there going to be major impact with either of these two funds that would dramatically impact her?
I would not expect a very large difference in performance between the 40/60 and 30/70 allocations.

Please see: Vanguard portfolio allocation models, 8.2% versus 7.7% historical average annual returns (1929-2020).
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Bluemnatra
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

lakpr wrote: Thu Jun 24, 2021 9:33 am So let me parry the question back at you -- how steadfast is that she must have all her investments in only ONE fund?
I will be the one managing her account. So, theoretically there may be thought for two funds. Are you thinking VSCGX and I bonds?
lakpr
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Re: What fund to pick for retired Mom

Post by lakpr »

Bluemnatra wrote: Thu Jun 24, 2021 10:22 am
lakpr wrote: Thu Jun 24, 2021 9:33 am So let me parry the question back at you -- how steadfast is that she must have all her investments in only ONE fund?
I will be the one managing her account. So, theoretically there may be thought for two funds. Are you thinking VSCGX and I bonds?
Correct, yes I am.
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Bluemnatra
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

lakpr wrote: Thu Jun 24, 2021 10:22 am
Bluemnatra wrote: Thu Jun 24, 2021 10:22 am
lakpr wrote: Thu Jun 24, 2021 9:33 am So let me parry the question back at you -- how steadfast is that she must have all her investments in only ONE fund?
I will be the one managing her account. So, theoretically there may be thought for two funds. Are you thinking VSCGX and I bonds?
Correct, yes I am.
I am unfamiliar with I bonds. Can she only purchase $10,000 per year? If we invest $130,000 how much would be in I bonds and how much in I bonds?
lakpr
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Re: What fund to pick for retired Mom

Post by lakpr »

Bluemnatra wrote: Thu Jun 24, 2021 10:25 am I am unfamiliar with I bonds. Can she only purchase $10,000 per year? If we invest $130,000 how much would be in I bonds and how much in I bonds?
https://www.treasurydirect.gov/indiv/re ... s_ibuy.htm

You can buy $10k per SSN per year. You can also deliberately overpay your tax liability by $5k, then request the IRS to send the refund as paper bonds, then send them back to Treasury Direct to convert to electronic form.

I don't understand your second question .... or may be it is related to my suggestion about $110k into VSCGX + $10k this year into I bonds, and another $10k next year into I bonds.
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Bluemnatra
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

Okay here’s what I came up with. She has a total of $160,000. Keep $30,000 in a high yield savings account. Invest $130,000 in VSCGX. This would give an asset allocation of roughly 20%/50%/30% cash/bonds/stocks. With the $30,000 in Ally and investing $130,000 in VTINX wouldn’t she be underweighted in stocks for growth?
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retired@50
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Re: What fund to pick for retired Mom

Post by retired@50 »

Bluemnatra wrote: Thu Jun 24, 2021 12:24 pm Okay here’s what I came up with. She has a total of $160,000. Keep $30,000 in a high yield savings account. Invest $130,000 in VSCGX.
I think the above is a good plan. ^^^

Using VTINX would lower the percentage in stock index funds since it only has 30% in stock, where the LifeStrategy fund (VSCGX) has 40% in stock index funds.

Regards,
This is one person's opinion. Nothing more.
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galawdawg
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Re: What fund to pick for retired Mom

Post by galawdawg »

Bluemnatra wrote: Thu Jun 24, 2021 12:24 pm Okay here’s what I came up with. She has a total of $160,000. Keep $30,000 in a high yield savings account. Invest $130,000 in VSCGX. This would give an asset allocation of roughly 20%/50%/30% cash/bonds/stocks. With the $30,000 in Ally and investing $130,000 in VTINX wouldn’t she be underweighted in stocks for growth?
You're pretty much splitting hairs at this point.

$130k in VTINX and $30k in Ally at historic rates of return will more than meet her retirement needs. Even if the historic returns of VTINX were cut in half, her retirement needs will still be met. Putting the same $130k in VSCGX may increase her potential gain but may also increase her potential loss. Increased potential returns equals increased risk.

Take a look at the most recent downturn. In 2008, VTINX dropped 10.83% but in 2009 it gained 14.26%, making the cumulative return for those two years a gain of 3.42%. However, in 2008, VSCGX dropped nearly twice as much, 19.52%, and didn't recover that loss in 2009, only gaining 17.06% that year (with a two year cumulative return a loss of 2.46%). Is your mom willing to accept a potential loss in her portfolio that could be twice the loss of VTINX to reap a potential annual average increased return of 1%?

So it is really a very personal question for your mom based upon her risk tolerance. As I said, she doesn't need to take more risk than VTINX...so the question is, does she want to?
delamer
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Re: What fund to pick for retired Mom

Post by delamer »

Bluemnatra wrote: Thu Jun 24, 2021 12:24 pm Okay here’s what I came up with. She has a total of $160,000. Keep $30,000 in a high yield savings account. Invest $130,000 in VSCGX. This would give an asset allocation of roughly 20%/50%/30% cash/bonds/stocks. With the $30,000 in Ally and investing $130,000 in VTINX wouldn’t she be underweighted in stocks for growth?
The research shows that you need a minimum 30% stock allocarion to sustain a 4% safe withdrawal rate.

So the allocation you selected is fine.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
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galawdawg
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Re: What fund to pick for retired Mom

Post by galawdawg »

delamer wrote: Thu Jun 24, 2021 12:59 pm
Bluemnatra wrote: Thu Jun 24, 2021 12:24 pm Okay here’s what I came up with. She has a total of $160,000. Keep $30,000 in a high yield savings account. Invest $130,000 in VSCGX. This would give an asset allocation of roughly 20%/50%/30% cash/bonds/stocks. With the $30,000 in Ally and investing $130,000 in VTINX wouldn’t she be underweighted in stocks for growth?
The research shows that you need a minimum 30% stock allocarion to sustain a 4% safe withdrawal rate.

So the allocation you selected is fine.
OP earlier indicated the desired portfolio spending is $200-$300 per month, an annual withdrawal rate of just 2.7% using the higher $300 monthly figure.

But as I said...splitting hairs. A difference of 10% in the allocation is unlikely to change the success/failure possibilities.
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celia
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Re: What fund to pick for retired Mom

Post by celia »

If you’re going to help your mom, you should really be looking at her whole portfolio, and how this $90K fits in. Looking at only one account makes no sense.

An important question to ask is if she has any assets in a tax-deferred account. If she is filing as Single and her tax-deferred will be over $500k by the time she turns 72, you should be asking about Roth conversions instead.

Just saying…
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Bluemnatra
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Re: What fund to pick for retired Mom

Post by Bluemnatra »

celia wrote: Thu Jun 24, 2021 1:19 pm If you’re going to help your mom, you should really be looking at her whole portfolio, and how this $90K fits in. Looking at only one account makes no sense.

An important question to ask is if she has any assets in a tax-deferred account. If she is filing as Single and her tax-deferred will be over $500k by the time she turns 72, you should be asking about Roth conversions instead.

Just saying…
Unfortunately no tax deferred accounts. She only has a taxable brokerage account
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