Investing a rollover of a few hundred thousand

[Tadpole]

I was hoping to get some suggestions on investing at Vanguard after a rollover. We were abruptly hit with a change in my husband's defined contribution plan that led to a decision to roll his deferred retirement account to Vanguard. We had to act hastily so, for now, I have arranged to have the entire amount invested in Vanguard's target 2015 fund. The Vanguard representative assured me I could move it to a different allocation at any time. My husband is 70 and I am 68. He was a state government worker and I was a Fed civilian in FERS. We both have small pensions and social security and, right now, are not using any of our retirement accounts for expenses. He just started RMDs.

The rollover is about $250,000 and we have other investments but, for purposes of this post, just think of it as independent of the other accounts we have. I am concerned that the target retirement, which uses index bond funds, is not ideal since we not only are buying equities high but also are buying bonds with a great deal of interest rate/bubble risk. I am mimicing what I read but I cannot afford to make too bad a mistake with my husband's retirement account. If you had a few hundred thousand to invest today and were 70 years old, would you be scared of putting all into Vanguard's target 2015 fund? If so, do you have any ideas of what to do with it at our ages when we may not have long horizons to recover from a major loss? I originally thought that Wellesley with more hands on management would be better/more flexible through the bumps but the Vanguard advisor said he couldn't understand my thinking.

[dbr]

I think it is unnecessary to run scared from reading too much press about how bad a time it is to invest. It is always a bad time to invest of that is what you believe.

Personally I think Target Retirement Income is a good choice if you want minimum stock risk. I would not reduce stocks to less than 30%.

If you don't like bond funds you could buy a separate stock fund and put more of the fixed income in CDs, either in a separate IRA at a bank or by buying brokered CDs. Frankly I think intermediate duration bond funds for the retiree long run are just fine.

I don't see Wellington as attractive because you add manager risk and reduce diversification.

I would not take investment advice from a mutual fund company.

[BolderBoy]

Personally I think Target Retirement Income is a good choice if you want minimum stock risk. I would not reduce stocks to less than 30%.

I second this. You made a good, quick choice for your ages.

[Mike Scott]

I would also look at the Vanguard Life Strategy funds. They are very similar in many ways but have a few differences from the Target Date and Target Retirement Income funds.

[traveltoomuch]

If you had a few hundred thousand to invest today and were 70 years old, would you be scared of putting all into Vanguard's target 2015 fund?

It sounds like your basic living expenses are being covered (somehow). Given that, I would not be scared. It sounds like you've made a fine choice for the moment. You can decide later if you want to stay with the target date fund, which will drift toward 30/70 stock/bond, or choose something with a fixed allocation (e.g. the life strategy funds or the 60/40 balanced index fund). But you're fine for now.

[t3chiman]

... do you have any ideas of what to do with it at our ages ....

First, congratulations on making it into your golden years with money in the bank. And on having a truly first-world problem like what to do with a few hundred thousand USD.

In your shoes, I would look carefully at Vanguard Growth and Income fund, VDIGX. It has averaged 8% return for the past 20-odd years.

After getting the investment picture sorted, you may want to take a chunk out for pure enjoyment. Paris/Normandy/Loire Valley, for instance. Or, if you crave majestic scenery, tour the South Island of New Zealand for a couple of months.

HTH

[Bogle_Feet]

is not ideal since we not only are buying equities high but also are buying bonds with a great deal of interest rate/bubble risk.

That's why you own BOTH. Both stocks and bonds are not going to crash. When stocks fall, money runs to the safety of bonds and vice versa.

[Watty]

I would also look at the Vanguard Life Strategy funds.

+1

Personally I think Target Retirement Income is a good choice if you want minimum stock risk. I would not reduce stocks to less than 30%.

+1


If you have a mortgage then you could also pay that off even if it took a few years to withdraw the money without going into too high a tax bracket.

[Tadpole]

Thanks everyone for your help. I will look at LifeStrategy and VDIGX.

[Grt2bOutdoors]

Do not recommend Vanguard Growth and Income, it is all stock. Recommend Target Retirement income or Wellesley fund. When you retire, you will take your money out incrementally, usually over the years, stock prices are high, they can go higher yet. Bond prices are high, but as fund reinvents and rebalances, it will be picking up cheaper priced fixed income. Stop watching cnbc, and stop listening to your neighbor and shoeshine boy, read the Vanguard, troweprice, fidelity websites, more of good data there. You can not successfully time the markets.

[dbr]

Thanks everyone for your help. I will look at LifeStrategy and VDIGX.

Why VDIGX. I had to look up the symbol (please save people time by including the fund name). That fund is Dividend Growth Fund. It is unlikely that would be suitable being 100% stocks. If you are dubious about risk in investing that would be about the last choice you would make. Even if you were interested in taking risk to grow this particular asset for some reason, I doubt that would be among the first choices. Anyway that fund is closed.

Please don't say it was a typo.

[BL]

I would also look at the Vanguard Life Strategy funds.

+1

Personally I think Target Retirement Income is a good choice if you want minimum stock risk. I would not reduce stocks to less than 30%.

+1


If you have a mortgage then you could also pay that off even if it took a few years to withdraw the money without going into too high a tax bracket.

+1 If you want a fixed 60% bonds, then LS conservative stays there. (Some people do prefer Wellesley.) If you want 70% bonds now and future, then Target Retirement Income is fine. If you want to gradually go from 60 to 70% bonds 2015 is fine. All of these are acceptable. If you really want CDs for the 70-60% fixed income, you could do that and just buy 30-40% total stock market. No one knows which will do best in the future as we don't have a crystal ball. You want something where you can "sleep well at night" through ups and downs.

[Tadpole]

Thanks everyone for your help. I will look at LifeStrategy and VDIGX.

Why VDIGX.

t3chiman suggested: "Vanguard Growth and Income fund, VDIGX". I didn't check the ticker but admitted I would need to investigate it.

[Tadpole]

+1 If you want a fixed 60% bonds, then LS conservative stays there. (Some people do prefer Wellesley.) If you want 70% bonds now and future, then Target Retirement Income is fine. If you want to gradually go from 60 to 70% bonds 2015 is fine. All of these are acceptable. If you really want CDs for the 70-60% fixed income, you could do that and just buy 30-40% total stock market. No one knows which will do best in the future as we don't have a crystal ball. You want something where you can "sleep well at night" through ups and downs.

I will look at these options. I may initially put it in the Target 2015 and then unbundle the Target retirement a third or quarter at a time and repackage it. I have a few days to look at the scenarios suggested and study Vanguard funds before the money gets to Vanguard using Fidelity's weird distribution method. (I was pretty upset that Fidelity would not do the rollover without issuing a check Vanguard on my husband's behalf and sending it to us to send to Vanguard. I thought that was a bad thing to do but Fidelity wouldn't give us any other option.)

[t3chiman]

...

Please don't say it was a typo.

Worse than a typo; it was a blunder. VQNPX/VGIAX are the correct fund symbols.

Apologies for any confusion.