Help me get into Target Date Funds

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Rajsx
Posts: 445
Joined: Wed Mar 21, 2007 10:07 pm
Location: Florida

Help me get into Target Date Funds

Post by Rajsx » Sun May 26, 2019 1:42 pm

I am gradually getting convinced to include Target Date Funds in our Portfolio & need help finding out how to get there with least amount of damage.

The main appeal of Target Date Funds for us are -

1) Auto Pilot periodic re balancing
2) I am less tempted to meddle around with a set & forget Portfolio, a relative safety from myself .
3) When I pass away or lose mental acuity, it will be easier on DW .

Let me give some details -
I am 63, DW 58 and we will start withdrawing from our portfolio in 2 yrs, when I turn 65.

Presently we have around $ 6 million in total, all in Vanguard, with Asset Allocation of 50% Stocks, 50% Fixed income (45% Bonds & 5% Short Term CDs)

At present we mostly have Total Stock Index & some of International Stock Index in Taxable

Mostly Total Bond Index In Tax deferred Retirement Funds & the International Stock Index in our Roths, with NO international Bond Fund.

Our present Total Expense Ratio as per the Vanguard Website is 0.06%

If I go to Target Retirement in my Tax Deferred Funds, they will have at least some Stocks & the Asset Allocation will end up more than 50% Stocks. & In the Taxable ($3 mi) I will end up with nominal Bonds increasing my yearly taxes. These changes will also likely increase the Portfolio Expense Ratio.

I will be thankful for your opinions, thoughts in getting to my goal with the least damage .

Thanking you all
We do not stop laughing because we grow old, we grow old because we stop laughing !!

texasdiver
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Re: Help me get into Target Date Funds

Post by texasdiver » Sun May 26, 2019 2:40 pm

I don't see how you do it without taking a tax hit.

But I also think that doing just some of your portfolio in target-date funds doesn't really achieve much anyway. It isn't going to reduce your complexity or need to manage your portfolio.

Where target-date funds are most useful is for people like newer investors who who just have one 401(k) or IRA to dump money into. Or, you mostly have just tax-deferred accounts and are consolidating everything into one or two accounts. For example, when we recently moved and changed jobs my wife was able to consolidate all of her old 401(k), 403(b) and profit sharing accounts into a single Vanguard IRA and then we just put it into a target date fund. And I was able to consolidate all of my various accounts into a single TSP account with a target date fund.

CommitmentDevice
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Re: Help me get into Target Date Funds

Post by CommitmentDevice » Sun May 26, 2019 2:50 pm

The glide path might not be relevant for you given how close you are to retirement. Vanguard LifeStrategy Funds offer automatic rebalancing so you could still “set it and forget it” but without having to deal with the glide path of target date funds.

pkcrafter
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Re: Help me get into Target Date Funds

Post by pkcrafter » Sun May 26, 2019 4:48 pm

Ragsx, what will your initial withdrawal rate be when you retire?

Paul
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student
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Re: Help me get into Target Date Funds

Post by student » Sun May 26, 2019 6:02 pm

I think you already have a great setup and there is no need to move to target date funds.

Lou354
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Re: Help me get into Target Date Funds

Post by Lou354 » Sun May 26, 2019 10:19 pm

Lifestrategy Income Fund is only 20% stocks, so it won’t cause your overall asset allocation to deviate from 50:50 quite as much as the target date funds.

If I were you I’d stick with bonds in the tax-deferred accounts for now. In retirement you can start spending down from the taxable accounts, which may open up some room for more equities in tax-deferred.

Topic Author
Rajsx
Posts: 445
Joined: Wed Mar 21, 2007 10:07 pm
Location: Florida

Re: Help me get into Target Date Funds

Post by Rajsx » Sun May 26, 2019 11:21 pm

Thanks Lou for the excellent idea, after 2 years I will start withdrawing $ 160k a year (+ inflation ) from taxable equity funds & that is one way I can add some equity in the tax deferred . At that point I can add Life Strategy Income fund in the Tax Deferred .

Thanks everybody
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CABob
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Re: Help me get into Target Date Funds

Post by CABob » Sun May 26, 2019 11:35 pm

You might also consider opening a TR or LS fund in taxable and tax deferred accounts and then direct any dividends from your accounts to those funds.
Bob

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beyou
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Re: Help me get into Target Date Funds

Post by beyou » Mon May 27, 2019 6:16 am

CommitmentDevice wrote:
Sun May 26, 2019 2:50 pm
The glide path might not be relevant for you given how close you are to retirement. Vanguard LifeStrategy Funds offer automatic rebalancing so you could still “set it and forget it” but without having to deal with the glide path of target date funds.
The glidepath floors equities at 30% (Target Retirement Income Fund). At that point the decision is between 20% equity (Lifestrategy Income) and 30% equity (Target Retirement). If you did this in deferred only, no tax hit and you can change your mind later. Spend down taxable until RMD at 70, and you are left with a simple portfolio. Under such strategy, you can do this later when you are closer to needing to do so. There are tax reasons to spend from both taxable and tax deferred, but seems selling a bit of taxable each year is better than selling it all at once, to switch immediately.

longinvest
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Re: Help me get into Target Date Funds

Post by longinvest » Mon May 27, 2019 7:01 am

CommitmentDevice wrote:
Sun May 26, 2019 2:50 pm
The glide path might not be relevant for you given how close you are to retirement. Vanguard LifeStrategy Funds offer automatic rebalancing so you could still “set it and forget it” but without having to deal with the glide path of target date funds.
+1 :thumbsup
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Charlieville
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Re: Help me get into Target Date Funds

Post by Charlieville » Mon May 27, 2019 9:42 am

Simplicity for your spouse if your spouse outlives you or you develop dementia. Simplicity for you as you age. As a former executor of a number of estates it provides simplicity for your heirs too. Many people's financial life look like their garage or basement--lots of stuff no organization. What appears organized to you is a mess to others. Finally, don't set your RMDs to reoccur at the end of the tax year so your heirs have to react to your death.

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