Vanguard lifestrategy vs. Target Date Funds

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EMDW
Posts: 79
Joined: Thu Jul 04, 2013 11:18 am

Vanguard lifestrategy vs. Target Date Funds

Post by EMDW » Tue Feb 07, 2017 7:41 am

We have the 3 funds portfolio mix (total stock, total bond, total international), prime money market and the target date funds available for 4 employees. We'll like to remove most of the target date choices and consider instead the lifestrategy funds to simply the choices. This is a non elective, safe harbor 401K/Profit sharing.

Age early 30's: full time, not eligible, no retirement savings. Consider LS 80/20?
Age mid 40's, part time, not eligible, no retirement savings. Consider LS 80/20?
Age mid 60's, part time, not eligible, no retirement savings. Consider LS 60/40?
Age late 60's, part time, eligible on the target date 2015. Keep Target date 2015 to prevent blackout dates.

Any Thoughts? Thanks in advance.

https://investor.vanguard.com/mutual-fu ... etirement/#/

https://investor.vanguard.com/mutual-fu ... estrategy/#/

Lou354
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Re: Vanguard lifestrategy vs. Target Date Funds

Post by Lou354 » Tue Feb 07, 2017 8:08 am

If any other of your current or future employees are the type to pick a fund when they first start contributing and then never look at it again, a target date fund might be better for them.

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JamesSFO
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Re: Vanguard lifestrategy vs. Target Date Funds

Post by JamesSFO » Tue Feb 07, 2017 8:58 am

I believe most companies that default to a LS-type fund just pick one default, e.g. 60 stock/40 bond. Your plan administrator should have some perspective on this. Since the LS fund will not "glide", picking a default that someone who forgets about it can stick to is important.

I also wouldn't let the dislike of TD funds here influence the plan design, they are pretty standard and most emps recognize them and don't feel they need to think much to enter them. The LS series may require more hand holding of emps.

YMMV.

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jhfenton
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Location: Ohio

Re: Vanguard lifestrategy vs. Target Date Funds

Post by jhfenton » Tue Feb 07, 2017 9:07 am

sari wrote:We have the 3 funds portfolio mix (total stock, total bond, total international), prime money market and the target date funds available for 4 employees. We'll like to remove most of the target date choices and consider instead the lifestrategy funds to simply the choices. This is a non elective, safe harbor 401K/Profit sharing.

Age early 30's: full time, not eligible, no retirement savings. Consider LS 80/20?
Age mid 40's, part time, not eligible, no retirement savings. Consider LS 80/20?
Age mid 60's, part time, not eligible, no retirement savings. Consider LS 60/40?
Age late 60's, part time, eligible on the target date 2015. Keep Target date 2015 to prevent blackout dates.

Any Thoughts? Thanks in advance.

https://investor.vanguard.com/mutual-fu ... etirement/#/

https://investor.vanguard.com/mutual-fu ... estrategy/#/
That sounds like a recipe for trouble, defaulting folks into an investment and then keeping them there potentially past the point at which it is still appropriate. It's not like you can default a 45-year old into 80/20 and then switch them yourselves at 60 to 60/40.

It is best to think of the Target Retirement funds as a single default option. They simplify plan administration and employee fund selection rather than complicate it.

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: Vanguard lifestrategy vs. Target Date Funds

Post by retiredjg » Tue Feb 07, 2017 9:10 am

Many employees pick something and never change. If they pick a target fund, at least it becomes more conservative as they get older.

Second, I consider the suggestions you posted to be too aggressive. If you are going to make a suggestion, err on the side of being too conservative, not too aggressive.

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