Vanguard TD funds

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Fishing2retire
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Vanguard TD funds

Post by Fishing2retire » Sun Jul 14, 2019 10:32 am

Just curious on how many people use vanguard TDF funds and are you happy with your choice?

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nedsaid
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Re: Vanguard TD funds

Post by nedsaid » Sun Jul 14, 2019 10:34 am

At a former workplace savings plan, I did have a Vanguard 2025 Target Fund for a brief time. I like these funds as they give you a world-wide diversified portfolio for very low fees. They are a good set it and forget it investment.
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livesoft
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Re: Vanguard TD funds

Post by livesoft » Sun Jul 14, 2019 10:51 am

We have something like 0.1% of our assets in a similar fund: Vanguard LifeStrategy Moderate Growth. It differs from a TD fund in that its 60/40 asset allocation does not change with time. It does make a nice benchmark to compare the performance of the rest of the portfolio against, so I am very happy with it.

But the OP's question is interesting because I suspect the people who are not happy with Vanguard TD funds don't use them, so that anybody who uses them will report they are happy. :)
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dbr
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Re: Vanguard TD funds

Post by dbr » Sun Jul 14, 2019 12:19 pm

I don't because balanced funds don't fit how my assets are located across tax deferred and taxable investing. A hazard to be aware of is that one should not build up significant assets in a balanced fund in a taxable account as it may be expensive to change later.

Otherwise as a matter of personal choice I would rather hold stocks and bonds in separate funds.

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goingup
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Re: Vanguard TD funds

Post by goingup » Sun Jul 14, 2019 12:39 pm

We used to use them in IRA accounts. When our portfolio got larger I switched our rollover IRAs/401K to blended stock/bond funds. I like the idea of set and forget it, but the changing glide path of Target Date funds was not ideal when combined with other accounts. I also prefer to hold less international stock than the Vanguard TDFs hold. I like 20% not 40%.

Target Funds are the right solution for many investors, but we found individual funds worked better in our later accumulating stage.

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Kalo
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Re: Vanguard TD funds

Post by Kalo » Sun Jul 14, 2019 12:49 pm

I would prefer the Life Strategy funds if I were to go that route. The reasons I haven't are:

1) higher expense ratios that, even though the amount is probably insignificant, still bugs me
2) the fact that bonds are split between US and International. I am happy to have exposure to international stocks, but do not understand or feel comfortable with the notion of holding even hedged international bonds
3) no TIPS allocation in the bond portion, which I do have in my current holdings

So bottom line, very little bang (simplicity, from what, occasional effort to re-balance? I'm not even sure I believe in re-balancing. I might do it but prefer to be in control of it if I decide it's become necessary), for less bucks (higher expense ratio).

The real plus would be behavioral. If I thought I was going to have trouble sticking with my plan and IPS, I would strongly consider an all in one fund for my tax deferred accounts.

Kalo
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Wiggums
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Re: Vanguard TD funds

Post by Wiggums » Sun Jul 14, 2019 12:53 pm

I have not held the TDF in 33 years. Nothing wrong with them, but I prefer to hold the funds separately and in the best account type whenever possible.

Good luck to you...

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Fishing2retire
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Re: Vanguard TD funds

Post by Fishing2retire » Sun Jul 14, 2019 1:02 pm

So this will be in a Roth IRA. I’m currently in 5 fund portfolio was wanting to do 3 fund portfolio. TDF or life strategy. The AA I prefer now is 75/25. I’m a procrastinator and I overthink things a lot.

02nz
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Re: Vanguard TD funds

Post by 02nz » Sun Jul 14, 2019 1:18 pm

There's a poster on here with a signature to the effect of, If you have to ask if a target date fund is right for you, it is. It may not apply down to every last person, but I think it's pretty much true. I don't use them myself, but particularly in a tax-advantaged account, they are a great set-it-and-forget-it option.

The alternative is to go all stocks in the Roth IRA, since generally you're likely to withdraw from it last and this also makes best use of tax-free growth. Put the bond allocation in your 401k (or traditional IRA if you have one).
Last edited by 02nz on Sun Jul 14, 2019 1:21 pm, edited 1 time in total.

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Re: Vanguard TD funds

Post by petulant » Sun Jul 14, 2019 1:21 pm

Fishing2retire wrote:
Sun Jul 14, 2019 1:02 pm
So this will be in a Roth IRA. I’m currently in 5 fund portfolio was wanting to do 3 fund portfolio. TDF or life strategy. The AA I prefer now is 75/25. I’m a procrastinator and I overthink things a lot.
Picking a balanced fund like a TD fund to hold in your Roth IRA is a great idea if you're starting out and don't have a lot of assets in other accounts. Picking one balanced fund and saving in that over time can be a great help to keep you from overthinking/tinkering. Since you may want plenty of equities, I would suggest the LifeStrategy Growth fund, which has an 80/20 allocation. LifeStrategy funds have some benefits over TD (like a fixed asset allocation) so you can accumulate there for a few years and then revisit.

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Fishing2retire
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Re: Vanguard TD funds

Post by Fishing2retire » Sun Jul 14, 2019 1:25 pm

I have 20 years until I tap into my Roth. I like the simplicity of the TDF and life strategy however I don’t like international bonds so much. It’s a hard decision!! Between those and 3 fund.

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Re: Vanguard TD funds

Post by 02nz » Sun Jul 14, 2019 1:28 pm

Fishing2retire wrote:
Sun Jul 14, 2019 1:25 pm
I have 20 years until I tap into my Roth. I like the simplicity of the TDF and life strategy however I don’t like international bonds so much. It’s a hard decision!! Between those and 3 fund.
There are hard decisions in life. This is not one of them, really. Do you want the simplest, set-it-and-forget-it option, or the one with (slightly) lower cost and more control?

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Watty
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Re: Vanguard TD funds

Post by Watty » Sun Jul 14, 2019 1:46 pm

I retired four years ago and put almost all my funds into the Vanguard 2015 Target date fund.

I did not have much retirement money in a taxable account so I did not need to worry about tax efficiency so it was a good choice for me.

It helps that the market just hit a new high but so far it is up 10.25% YTD in 2019 and so far the bull market has kept my portfolio roughly even with my spending so I am very happy

Most people are geniuses though when the market is up so that does not really mean much.

The real test will come in another 20 years when I will likely be less financially capable or if my less financially knowledgeable wife needs to manage it some day. There is a lot to be said for putting your portfolio on auto pilot as much as possible.

I have no regrets in having picked it.

As other people have said I was not entirely comfortable with the international bonds that the target date fund owns but in an odd contrary sort of way having so many people question using international bonds is a somewhat good sign to me that they might be a good thing to own for diversification.

I have seen lots of times when the group consensus even in these boards was that things like; health care stocks, small cap value, emerging markets, tech stocks, real estate, commodities, precious metals, biotech stocks, dividend paying stock, etc where a great choice that should be overweight and that rarely turned out well. If everyone was touting the benefits of owning international bonds then that would be more concerning to me.
Last edited by Watty on Sun Jul 14, 2019 5:40 pm, edited 1 time in total.

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Fishing2retire
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Re: Vanguard TD funds

Post by Fishing2retire » Sun Jul 14, 2019 4:26 pm

Thanks everyone for your advice.
Greatly appreciate it.
Also when I decide to start taking monthly payments from my Roth in retirement what is the process in doing so?

dbr
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Re: Vanguard TD funds

Post by dbr » Sun Jul 14, 2019 4:34 pm

Fishing2retire wrote:
Sun Jul 14, 2019 4:26 pm
Thanks everyone for your advice.
Greatly appreciate it.
Also when I decide to start taking monthly payments from my Roth in retirement what is the process in doing so?
Brokers or fund companies will set up an automatic withdrawal agreement. However, it is not necessarily the case that you want a fixed amount paid out from an investment account on a monthly basis. It might be a better fit to your spending to withdraw manually according to need.

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Re: Vanguard TD funds

Post by Silence Dogood » Sun Jul 14, 2019 4:44 pm

If you're having a difficult time making this decision, then I would definitely recommend a Target Retirement or LifeStrategy fund (if you're having a difficult time making this decision you are likely to have a difficult time making decisions regarding rebalancing).

Personally, I am very happy with the Vanguard Target Retirement 2055 fund (VFFVX).

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Re: Vanguard TD funds

Post by Silence Dogood » Sun Jul 14, 2019 5:03 pm

Kalo wrote:
Sun Jul 14, 2019 12:49 pm

1) higher expense ratios that, even though the amount is probably insignificant, still bugs me
2) the fact that bonds are split between US and International. I am happy to have exposure to international stocks, but do not understand or feel comfortable with the notion of holding even hedged international bonds
3) no TIPS allocation in the bond portion, which I do have in my current holdings
1) For what it's worth, supposedly Vanguard is considering switching to the equivalent ETF share class for the underlying funds for their Target Retirement and LifeStrategy funds. This would result in a lower expense ratio for these funds (VFFVX would go from 0.15% to 0.05%).

2) I don't think it's a really big deal either way, but international bonds are the largest asset class. I don't think the extra diversification will hurt (although I doubt it will help much either).

3) The LifeStrategy funds don't contain TIPS, but the Target Retirement funds do (short-term TIPS during retirement years).
Last edited by Silence Dogood on Tue Jul 16, 2019 10:09 am, edited 1 time in total.

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Fishing2retire
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Re: Vanguard TD funds

Post by Fishing2retire » Sun Jul 14, 2019 7:38 pm

Thanks everyone for the advice I have some decisions to make. I’m just glad I got away from EJ last year and there high fees now I have to get my wife to transfer from EJ to vanguard as well.

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Fishing2retire
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Re: Vanguard TD funds

Post by Fishing2retire » Sun Jul 14, 2019 7:41 pm

Also would the managed payout fund be a good choice in retirement?

anil686
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Re: Vanguard TD funds

Post by anil686 » Sun Jul 14, 2019 8:28 pm

I use them in all my tax advantaged accounts. They are so inexpensive and provide an opportunity to avoid behavioral pitfalls. I adjust the bond percentages to get my desired allocation and since they are in tax advantaged accounts, I don’t worry about tax consequences when changing. Hope that helps....

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Re: Vanguard TD funds

Post by sawhorse » Sun Jul 14, 2019 8:57 pm

The target date funds are very good for people who don't have enough to meet the $3k minimum for each individual fund. Overall they're not a bad choice.

Be aware, however, that Vanguard's target date funds are riskier in allocation than I've seen for other target date funds of the same retirement year. When I checked a few years ago, Blackrock was the riskiest followed by Vanguard. The TSP was the least risky. Don't just go by the year in the fund name. Make sure you are comfortable with the underlying allocation.

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Re: Vanguard TD funds

Post by arcticpineapplecorp. » Sun Jul 14, 2019 9:06 pm

Fishing2retire wrote:
Sun Jul 14, 2019 1:25 pm
I have 20 years until I tap into my Roth. I like the simplicity of the TDF and life strategy however I don’t like international bonds so much. It’s a hard decision!! Between those and 3 fund.
but international bonds have done better than U.S. total bond fund this year so far:

total U.S. bond index +5.72%
total international bond index +6.16%

source:

Image

I have the funds separately and pay around .06% per year which is less than the TD funds right now. If they switch to ETFs for the underlying funds in the TD then the overall expense ratio would be .05% I believe and I would be all in (in my Roth IRA only).
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

ruhigste
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Re: Vanguard TD funds

Post by ruhigste » Mon Jul 15, 2019 10:53 am

TDFs worked well for us until we retired and needed to start withdrawals. When one has only a single TDF, how does one withdraw from the stock fund (only) when stocks outperform bonds? So we made the change to the three-fund portfolio plus an international bond fund. So far, we've been able to re-balance back to our target allocation using monthly withdrawals from the outperforming assets. It does require extra work to do the re-balancing, but I enjoy doing it.

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Re: Vanguard TD funds

Post by dbr » Mon Jul 15, 2019 11:16 am

ruhigste wrote:
Mon Jul 15, 2019 10:53 am
TDFs worked well for us until we retired and needed to start withdrawals. When one has only a single TDF, how does one withdraw from the stock fund (only) when stocks outperform bonds? So we made the change to the three-fund portfolio plus an international bond fund. So far, we've been able to re-balance back to our target allocation using monthly withdrawals from the outperforming assets. It does require extra work to do the re-balancing, but I enjoy doing it.
TDFs rebalance automatically at frequent intervals (daily?). Even as you withdraw the fund would be rebalancing.

Where your problem does come into play is when you have assets elsewhere that do not use the same TD fund and you have to mess around to get things on target. The messing around might get more bothersome if you can't manipulate the assets in the TD fund separately.

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Re: Vanguard TD funds

Post by Silence Dogood » Tue Jul 16, 2019 10:31 am

sawhorse wrote:
Sun Jul 14, 2019 8:57 pm
Be aware, however, that Vanguard's target date funds are riskier in allocation than I've seen for other target date funds of the same retirement year. When I checked a few years ago, Blackrock was the riskiest followed by Vanguard. The TSP was the least risky.
Which target retirement funds are less risky than Vanguard's? I think what you've written above is incorrect.

For example, it looks like both Schwab and Fidelity have higher stock allocations.

Schwab starts off at 95% stocks, Fidelity starts off at 93% stocks, Vanguard starts off at 90% stocks.

At age 65, Fidelity has 55% in stocks whereas Vanguard has 49% in stocks.

It looks like the Schwab funds are more conservative during retirement years, with a 25/75 stock/bond allocation compared to Vanguard's 30/70 stock/bond allocation.

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Re: Vanguard TD funds

Post by dbr » Tue Jul 16, 2019 10:45 am

Silence Dogood wrote:
Tue Jul 16, 2019 10:31 am
sawhorse wrote:
Sun Jul 14, 2019 8:57 pm
Be aware, however, that Vanguard's target date funds are riskier in allocation than I've seen for other target date funds of the same retirement year. When I checked a few years ago, Blackrock was the riskiest followed by Vanguard. The TSP was the least risky.
Which target retirement funds are less risky than Vanguard's? I think what you've written above is incorrect.

For example, It looks like both Schwab and Fidelity have higher stock allocations.

Schwab starts off at 95% stocks, Fidelity starts off at 93% stocks, Vanguard starts off at 90% stocks.

At age 65, Fidelity has 55% in stocks whereas Vanguard has 49% in stocks.

It looks like the Schwab funds are more conservative during retirement years, with a 25/75 stock/bond allocation compared to Vanguard's 30/70 stock/bond allocation.
The answer to this is that one thing that is definitely wrong with TD funds is marketing them to age of retirement rather than the investor selecting a fund of an appropriate asset allocation. This calculation is made more complex and less transparent by the construction of the glidepath. I would say TD funds are a complex and difficult to understand product.

All that said I don't think you can say they too risky or not. I would say a better statement is that taking implicit financial advice from a mutual fund company by buying a date of retirement asset allocation and glidepath is inappropriate. Only the investor can make a fit choice for asset allocation and how that should evolve. If the investor needs advice on that he should pay a fiduciary advisor for advice that considers his individual needs and wants or even (gasp!) ask here.

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Re: Vanguard TD funds

Post by Silence Dogood » Tue Jul 16, 2019 11:04 am

dbr wrote:
Tue Jul 16, 2019 10:45 am

The answer to this is that one thing that is definitely wrong with TD funds is marketing them to age of retirement rather than the investor selecting a fund of an appropriate asset allocation. This calculation is made more complex and less transparent by the construction of the glidepath. I would say TD funds are a complex and difficult to understand product.

All that said I don't think you can say they too risky or not. I would say a better statement is that taking implicit financial advice from a mutual fund company by buying a date of retirement asset allocation and glidepath is inappropriate. Only the investor can make a fit choice for asset allocation and how that should evolve. If the investor needs advice on that he should pay a fiduciary advisor for advice that considers his individual needs and wants or even (gasp!) ask here.
I don't think anyone is stating whether or not they are too risky.

Some Target Retirement funds are difficult to understand, some are not. The Vanguard Target Retirement funds are pretty easy to understand.

Regarding asset allocation, of course, at the end of the day, nothing can replace investor education.

Having said that, I honestly don't know what the "best" asset allocation is.

So far, I've been comfortable with the 90/10 asset allocation and I've never been tempted to change course. Would 95/5 or 80/20 be better? Maybe? Who knows?

Would it be better for me to pay an advisor to get a more *precise* allocation? I don't think so.

I think what is much more important is saving as much as possible and staying the course.

I know that as I get older, I would like to hold more in bonds and less in stocks. Is there a perfect way to do this? I doubt it. 30/70 *seems* like a good asset allocation for age 75.

I think "proper" asset allocation is less of a science than some Bogleheads would feel comfortable admitting.

I feel comfortable recommending Vanguard's Target Retirement funds.

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Re: Vanguard TD funds

Post by changingtimes » Tue Jul 16, 2019 11:05 am

I use a mix of Vanguard TR 2025 and 2020 in my 401k (totaling about 38% of my total holdings). I hate dealing with international holdings, and I also have a hard time settling on an asset allocation, so I want something with a glide path where it's also hard for me to do too much to muck with things. My Roth is 100% VTI, FWIW.

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Re: Vanguard TD funds

Post by Socrates » Tue Jul 16, 2019 11:14 am

I’m a procrastinator and I overthink things a lot.
TDF will be a really good choice for you as you can set and forget and move on

or...really bad, as you will have limited control over the funds rebalancing and "tweaking" and this may drive you crazy
“Don't waste your time looking back. You're not going that way.” ― Ragnar Lothbrok.

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Re: Vanguard TD funds

Post by Socrates » Tue Jul 16, 2019 11:15 am

I’m a procrastinator and I overthink things a lot.
TDF will be a really good choice for you as you can set and forget and move on

or...really bad, as you will have limited control over the funds rebalancing and "tweaking" and this may drive you crazy


I like using a group of funds so I can tweak things if needed, even though I am essentially buy and hold to a certain degree.
“Don't waste your time looking back. You're not going that way.” ― Ragnar Lothbrok.

dbr
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Re: Vanguard TD funds

Post by dbr » Tue Jul 16, 2019 11:16 am

changingtimes wrote:
Tue Jul 16, 2019 11:05 am
I use a mix of Vanguard TR 2025 and 2020 in my 401k (totaling about 38% of my total holdings). I hate dealing with international holdings, and I also have a hard time settling on an asset allocation, so I want something with a glide path where it's also hard for me to do too much to muck with things. My Roth is 100% VTI, FWIW.
So you are already mucking it up and not settling on an asset allocation -- well, just kidding, but it is a point it seems to me.

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changingtimes
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Re: Vanguard TD funds

Post by changingtimes » Tue Jul 16, 2019 11:32 am

dbr wrote:
Tue Jul 16, 2019 11:16 am
changingtimes wrote:
Tue Jul 16, 2019 11:05 am
I use a mix of Vanguard TR 2025 and 2020 in my 401k (totaling about 38% of my total holdings). I hate dealing with international holdings, and I also have a hard time settling on an asset allocation, so I want something with a glide path where it's also hard for me to do too much to muck with things. My Roth is 100% VTI, FWIW.
So you are already mucking it up and not settling on an asset allocation -- well, just kidding, but it is a point it seems to me.
LOL, I know, it sounds like it, but adding in the two TDFs actually got me to an AA across all of my holdings that is what I want, with their glide path helping to force a bit of conservatism in the AA as time goes on.

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Re: Vanguard TD funds

Post by sawhorse » Tue Jul 16, 2019 4:11 pm

Silence Dogood wrote:
Tue Jul 16, 2019 10:31 am
sawhorse wrote:
Sun Jul 14, 2019 8:57 pm
Be aware, however, that Vanguard's target date funds are riskier in allocation than I've seen for other target date funds of the same retirement year. When I checked a few years ago, Blackrock was the riskiest followed by Vanguard. The TSP was the least risky.
Which target retirement funds are less risky than Vanguard's? I think what you've written above is incorrect.

For example, it looks like both Schwab and Fidelity have higher stock allocations.

Schwab starts off at 95% stocks, Fidelity starts off at 93% stocks, Vanguard starts off at 90% stocks.

At age 65, Fidelity has 55% in stocks whereas Vanguard has 49% in stocks.

It looks like the Schwab funds are more conservative during retirement years, with a 25/75 stock/bond allocation compared to Vanguard's 30/70 stock/bond allocation.
I haven't checked for a few years, so perhaps things have changed. I know that Vanguard was riskier a few years ago for the year that I was interested in. The TSP was the least risky.

It's not just percent stock that matters. 30% of Vanguard's bond portion is international bonds, and those are riskier.

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Fishing2retire
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Re: Vanguard TD funds

Post by Fishing2retire » Tue Jul 16, 2019 4:29 pm

For my age of 40 vanguard the TDF was a little too aggressive for me the 2040 fund I believe which is 85/15.
For me I would like to be more conservative more like 75/25 which is the 2030 fund or may go up to 2035 fund at 80/20. I’m not a big fan of international bonds either. Just moved from 5 to 3 funds but do like the auto rebalance of the TDF

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Re: Vanguard TD funds

Post by bck63 » Tue Jul 16, 2019 4:40 pm

I use the 2025 fund at both Vanguard and Fidelity (the 2025 index fund at Fido). However I also use the Fidelity four in one fund, combined with the retirement income index fund. This will give me 10 years of expenses in the income fund, which I can draw on in the event of a severe downturn, if that happens before the 2025 funds actually become income funds. I use the two in accordance with my current AA. I like using all three types of funds.

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Re: Vanguard TD funds

Post by vineviz » Tue Jul 16, 2019 4:52 pm

ruhigste wrote:
Mon Jul 15, 2019 10:53 am
TDFs worked well for us until we retired and needed to start withdrawals. When one has only a single TDF, how does one withdraw from the stock fund (only) when stocks outperform bonds?
A target date fund, because of their continual rebalancing, effectively automatically do this for you.

In a TDF, when stocks go up the fund balances by selling stocks and buying bonds to keep the asset allocation on target. You don't need to worry about what the market has done or is doing.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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