In need of suggestions and help

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Topic Author
ardie2017
Posts: 3
Joined: Mon Jun 19, 2017 4:19 pm

In need of suggestions and help

Post by ardie2017 »

Hello, Thanks in advance for your help and input.

Newbie in investing here. After doing research for a while and being afraid to jump in, I have decided to go with either the life strategy or the target date for their simplicity and also would be a good starters for me to get a little more comfortable with the amount of information and maybe make changes down the road. Here is a little information about me:
Married
my income about 73000 a year
spouse income about 25000 a year
age 30
planning to retire between 60-65
Risk taking capability medium to low

I am a little confused as to which of the following paths I should take or even if either of them make any sense (in regards to out IRAs), your suggestions are appreciated especially if you include the reasoning behind them since I am fairly new to this.

path one: Shoot for an overall portfolio of 65/35 by using the 2025 target date profile and applying that to both my own and the wife's account. (Assuming we are each allowed to contribute 5,500 by April of 2018).

path two: doing 5500 on my account with the 60/40 LS and 5500 on her account with the 80/20 LS averaging at 70/30 in total, 70 percent in stock seems a little to risky for my taste but don't really know any easy way to both take advantage of the 5500 limit and also achieve a 65/35.

my understanding is that with the target date setup since I dont really plan on retiring by 2025 the investment will grow very conservative very fast for us therefor I prefer the second path but I am not sure if that makes sense since I probably need to even adjust the second path very soon since the 30percent in bonds wont make much sense in a year or two (considering I am a little bit on the conservative side that risk taker).

What do you guys think,
Thanks Ardie
iamlucky13
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Location: Western Washington

Re: In need of suggestions and help

Post by iamlucky13 »

I concur with your thought about the Target Retirement 2025 not reflecting your timeline well, and would say go with the Life Strategy.

You're not going to see particularly large differences in the performance and risk of a 70/30 split versus a 65/35 split, but I presume you're not stuck making all your investments for a given account in one fund. In that case, you can make your account all moderate growth (60/40) and her account a mix of moderate growth and growth (80/20) in order to achieve that split if you wanted.

That's very minimal added complexity to get the balance you're seeking.
Avo
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Joined: Wed Jun 11, 2008 2:21 am
Location: California

Re: In need of suggestions and help

Post by Avo »

Welcome to the forum!

First of all, I tend to be more conservative than most here, and even to me, 650% stock at age 30 for a retirement portfolio is much too conservative. I have advised my 28 year old daughter to use Vanguard Target Date 2055, which is 90% stock. So I would recommend 80/20 lifestrategy for both of you.

Next, do you have access to 401k or 403b plans through your employers?
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Tyler Aspect
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Re: In need of suggestions and help

Post by Tyler Aspect »

Welcome to Bogleheads.

I think your question is restricted to your tradition IRA account with Vanguard. You are asking about how to reach a 65% stock / 35% bond asset allocation using balanced funds.

One balanced fund that is close to your target allocation is Vanguard Lifestrategy Moderate Growth (60% stock / 40% bond). Since it is a bit under your target asset allocation, what you can do is to purchase a few hundred dollars of ticker symbol VTI to bump up your stock ratio. If needed, you can purchase ticker symbol BND to reduce your stock ratio. VTI and BND are ETF share classes of the most commonly used index funds of Bogleheads.

By the way, 65% stock / 35% bond is not too conservative if you are just starting out. Only you know how much risk you can withstand.

(edited for spelling mistakes)
Last edited by Tyler Aspect on Tue Jun 20, 2017 11:00 am, edited 1 time in total.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.
Topic Author
ardie2017
Posts: 3
Joined: Mon Jun 19, 2017 4:19 pm

Re: In need of suggestions and help

Post by ardie2017 »

iamlucky13 wrote:I concur with your thought about the Target Retirement 2025 not reflecting your timeline well, and would say go with the Life Strategy.

You're not going to see particularly large differences in the performance and risk of a 70/30 split versus a 65/35 split, but I presume you're not stuck making all your investments for a given account in one fund. In that case, you can make your account all moderate growth (60/40) and her account a mix of moderate growth and growth (80/20) in order to achieve that split if you wanted.

That's very minimal added complexity to get the balance you're seeking.
thank you for the help, so I am not as far off as I thought.
Avo wrote:Welcome to the forum!

First of all, I tend to be more conservative than most here, and even to me, 650% stock at age 30 for a retirement portfolio is much too conservative. I have advised my 28 year old daughter to use Vanguard Target Date 2055, which is 90% stock. So I would recommend 80/20 lifestrategy for both of you.

Next, do you have access to 401k or 403b plans through your employers?
I see your point, also I do have a 401K that is about 90percent stocks. maybe this plus the 70/30 would pretty much match the 80-20 that you were hinting at.
Tyler Aspect wrote:Welcome to Bogleheads.

I think your question is restricted to your tradition IRA account with Vanguard. You are asking about how to reach a 65% stock / 35% bond asset allocation using balanced funds.

One balanced fund that is close to your target allocation is Vanguard Lifestrategy Moderate Growth (60% stock / 40% bond). Since it is a bit under your target asset allocation, what you can do is to purchase a few hundred dollars of ticker symbol VTI to bump up your stock ratio. If needed, you can purchase ticker symbol BND to reduce your stock ratio. VTI and BND are ETF share classes of the most commonly used index funds of Bobleheads.

By the way, 65% stock / 35% bond is not too conservative if you are just starting out. Only you know how much risk you can withstand.
Thank you for the input, is there any downside to having more than one component to a profile (LS+ VIT/BND) such as more costs of management and ... . Also on a slightly non related issue is there costs associated to making changes to your portfolio, for example if I do a target fund and two years down the road I decide I want to switch to LS will I be incurring a lot of charges? Thank you.
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Tyler Aspect
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Re: In need of suggestions and help

Post by Tyler Aspect »

ardie2017 wrote:Thank you for the input, is there any downside to having more than one component to a profile (LS+ VIT/BND) such as more costs of management and ... . Also on a slightly non related issue is there costs associated to making changes to your portfolio, for example if I do a target fund and two years down the road I decide I want to switch to LS will I be incurring a lot of charges? Thank you.
Normally it is a good idea to simplify our investment portfolio as much as possible by limiting the number of different funds that we own. Owning too many funds leads to complexity and indecision.

If you sell a Target Retirement fund and buy another Lifestrategy fund in a tax deferred account there would not be a cost to you at that point. However, the cost of that trade is reflected as a part of the annual expense ratio so that all investors of that fund would share collectively.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.
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