Vanguard Funds that offer a monthly payment?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
AlphaPilot
Posts: 60
Joined: Wed Jun 20, 2018 8:29 am

Vanguard Funds that offer a monthly payment?

Post by AlphaPilot »

Hey all,
I am looking into setting up some form of portfolio for a family member that wants to have monthly payments that they can use for some supplemental income to make up for them leaving a part-time job they held before. They have a nice nest egg, but I don't want them to fall for an annuity plan when I could see them doing just as well with something like a dividend fund maybe. The only request they had was that it was monthly instead of annually, so they could sort of just spend what they got that month instead of dividing it up.

Do any Vanguard funds jump out that would be good for this? I assume it needs to be a dividend or bond fund, or is there such a thing as a slowly depleting fund that sells off investments and stays tax-advantaged doing so?
dbr
Posts: 33846
Joined: Sun Mar 04, 2007 9:50 am

Re: Vanguard Funds that offer a monthly payment?

Post by dbr »

Just about any broker, presumably also Vanguard, will offer a plan to redeem shares and issue a monthly deposit from your account.

Here is the example for Fidelity: https://www.fidelity.com/cash-managemen ... ithdrawals

I couldn't quickly find one for Vanguard or only one for IRAs.

It is an investment mistake to equate fund distributions with the mechanics of making withdrawals from portfolios even if having the dividend deposited to your checking account is one way among many of taking withdrawals.
KT1959
Posts: 6
Joined: Tue Jul 03, 2018 1:48 pm

Re: Vanguard Funds that offer a monthly payment?

Post by KT1959 »

VWEHX
Katietsu
Posts: 4099
Joined: Sun Sep 22, 2013 1:48 am

Re: Vanguard Funds that offer a monthly payment?

Post by Katietsu »

I think you are thinking too narrowly about the investment choice because of the desired withdrawal mechanism.

Are the funds in a taxable account, traditional IRA, Roth? Age? Amount? Tax Bracket?
Impatience
Posts: 201
Joined: Thu Jul 23, 2020 3:15 pm

Re: Vanguard Funds that offer a monthly payment?

Post by Impatience »

Dividends are typically issued on a quarterly basis but that doesn’t stop you from withdrawing on a monthly basis. Just divide the quarterly dividend amount by 3 and withdraw that per month.
av111
Posts: 113
Joined: Mon Jan 26, 2015 1:27 pm

Re: Vanguard Funds that offer a monthly payment?

Post by av111 »

OP

Good rental property is the best source of monthly income. Also fills the desire for part time work
AV111
livesoft
Posts: 73523
Joined: Thu Mar 01, 2007 8:00 pm

Re: Vanguard Funds that offer a monthly payment?

Post by livesoft »

Monthly withdrawals can be set up at Vanguard from any fund. Shares would be automatically sold if a monthly dividend did not provide enough money. Do you need help finding that on the web page?

Or a combination of a bond fund with monthly dividend plus an automated withdrawal. There are many possibilities, so I don't see how picking a fund is important as long as the asset allocation is suitable for the entire portfolio.
Wiki This signature message sponsored by sscritic: Learn to fish.
MadHungarian
Posts: 184
Joined: Tue Jan 02, 2018 4:53 pm

Re: Vanguard Funds that offer a monthly payment?

Post by MadHungarian »

In theory the bond funds pay interest monthly. Of course as everyone knows, that's rather theoretical these days...
User avatar
Clever_Username
Posts: 1752
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: Vanguard Funds that offer a monthly payment?

Post by Clever_Username »

MadHungarian wrote: Mon Aug 24, 2020 12:28 pm In theory the bond funds pay interest monthly. Of course as everyone knows, that's rather theoretical these days...
I don't know, I'm still getting monthly payments from my bond funds. The ones in taxable go into a settlement account, the ones in tax-advantaged get reinvested, but it's still payments.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.
dbr
Posts: 33846
Joined: Sun Mar 04, 2007 9:50 am

Re: Vanguard Funds that offer a monthly payment?

Post by dbr »

av111 wrote: Sun Aug 23, 2020 12:26 pm OP

Good rental property is the best source of monthly income. Also fills the desire for part time work
Nothing at all wrong with real estate, but the simple desire to take withdrawals on a monthly basis has simple solutions that don't involve getting into a whole new investment business. One should not confuse procedures to manage cash flow with the larger topic of investment strategy.
GMT-8
Posts: 190
Joined: Fri Mar 26, 2010 5:11 pm

Re: Vanguard Funds that offer a monthly payment?

Post by GMT-8 »

I don't know, I'm still getting monthly payments from my bond funds.
Me too.
$20k year to date in monthly dividends from VBILX, VBLAX, VCADX and VCALX bond funds

GMT
stan1
Posts: 9217
Joined: Mon Oct 08, 2007 4:35 pm

Re: Vanguard Funds that offer a monthly payment?

Post by stan1 »

I think you are looking for something like the Franklin Income fund that pays out a fixed amount each month per share (whether as dividends or return of capital). Vanguard does not have a product exactly like Franklin Income.
dbr
Posts: 33846
Joined: Sun Mar 04, 2007 9:50 am

Re: Vanguard Funds that offer a monthly payment?

Post by dbr »

stan1 wrote: Mon Aug 24, 2020 12:44 pm I think you are looking for something like the Franklin Income fund that pays out a fixed amount each month per share (whether as dividends or return of capital). Vanguard does not have a product exactly like Franklin Income.
The Managed Allocation Fund VPGDX works that way.

That said I am not sure buying that fund for the sole reason of getting a payout would make a lot of sense. People do buy that fund to own the asset allocation, though I am not sure that would be recommended either. The fund has a checkered past and total assets of $1.3B, which is a resounding negation of the whole concept (Wellesley has $60.3B in assets).
FactualFran
Posts: 1172
Joined: Sat Feb 21, 2015 2:29 pm

Re: Vanguard Funds that offer a monthly payment?

Post by FactualFran »

dbr wrote: Mon Aug 24, 2020 1:00 pm
stan1 wrote: Mon Aug 24, 2020 12:44 pm I think you are looking for something like the Franklin Income fund that pays out a fixed amount each month per share (whether as dividends or return of capital). Vanguard does not have a product exactly like Franklin Income.
The Managed Allocation Fund VPGDX works that way.
The Vanguard Managed Allocation Fund does not work that way. The fund it used to be, Vanguard Managed Payout Fund, did work that way. According to the first paragraph of the Vanguard Announces Changes to Managed Payout Fund news release:
VALLEY FORGE, PA (February 28, 2020)—Vanguard today announced forthcoming changes to Vanguard Managed Payout Fund, including renaming it Vanguard Managed Allocation Fund, adding a new portfolio manager, and eliminating monthly payouts in favor of an annual distribution. The change to the portfolio management team is effective immediately; the investment objective and principal investment strategy will be changed in the second quarter to reflect the cessation of monthly payments. The last payment will be made in May.
User avatar
FelixTheCat
Posts: 1915
Joined: Sat Sep 24, 2011 12:39 am

Re: Vanguard Funds that offer a monthly payment?

Post by FelixTheCat »

I use Vanguard's Total Corporate ETF (VTF) to supplement my income. The bond etf pays 3% monthly.
Felix is a wonderful, wonderful cat.
dbr
Posts: 33846
Joined: Sun Mar 04, 2007 9:50 am

Re: Vanguard Funds that offer a monthly payment?

Post by dbr »

FactualFran wrote: Mon Aug 24, 2020 6:07 pm
dbr wrote: Mon Aug 24, 2020 1:00 pm
stan1 wrote: Mon Aug 24, 2020 12:44 pm I think you are looking for something like the Franklin Income fund that pays out a fixed amount each month per share (whether as dividends or return of capital). Vanguard does not have a product exactly like Franklin Income.
The Managed Allocation Fund VPGDX works that way.
The Vanguard Managed Allocation Fund does not work that way. The fund it used to be, Vanguard Managed Payout Fund, did work that way. According to the first paragraph of the Vanguard Announces Changes to Managed Payout Fund news release:
VALLEY FORGE, PA (February 28, 2020)—Vanguard today announced forthcoming changes to Vanguard Managed Payout Fund, including renaming it Vanguard Managed Allocation Fund, adding a new portfolio manager, and eliminating monthly payouts in favor of an annual distribution. The change to the portfolio management team is effective immediately; the investment objective and principal investment strategy will be changed in the second quarter to reflect the cessation of monthly payments. The last payment will be made in May.
Ah, thanks. I know it was not working out very well to maintain the hoped for "annuity like" distribution.
backpacker61
Posts: 238
Joined: Wed May 20, 2020 6:36 am

Re: Vanguard Funds that offer a monthly payment?

Post by backpacker61 »

For a simple "one decision" fund, I think it's hard to beat the Vanguard LifeStrategy Funds

http://investor.vanguard.com/mutual-fun ... trategy/#/

Distributions are quarterly, so they would have to budget each distribution across 3 months.

I use separate funds myself, but if I wanted to simplify down to just one, I would use one of these.
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
miket29
Posts: 189
Joined: Tue Jun 20, 2017 9:07 pm

Re: Vanguard Funds that offer a monthly payment?

Post by miket29 »

AlphaPilot wrote: Sun Aug 23, 2020 11:20 am Hey all,
I am looking into setting up some form of portfolio for a family member that wants to have monthly payments that they can use for some supplemental income to make up for them leaving a part-time job they held before. They have a nice nest egg
You don't give enough details for advising. See the sticky at the top of the forum "Asking Portfolio Questions". Is the nest egg in a taxable or tax-deferred account? It makes a difference.

If a taxable account, then see https://www.physicianonfire.com/selling ... dividends/ about why selling shares periodically is a preferred alternative to looking for bond or high-dividend funds for income.
Broken Man 1999
Posts: 5326
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, inland on high ground!

Re: Vanguard Funds that offer a monthly payment?

Post by Broken Man 1999 »

I set up DW's holding of Short-term Treasury Index MF to be the source fund for providing additional $$$ to supplement her SS. This investment is the closest thing we have to cash in our retirement accounts. Shares are sold each month to provide the desired amount of distribution.

The automated monthly distributions from her TIRA also sends taxes to the IRS.

Very easy to set up.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
User avatar
grabiner
Advisory Board
Posts: 28296
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Vanguard Funds that offer a monthly payment?

Post by grabiner »

KT1959 wrote: Sun Aug 23, 2020 11:59 amVWEHX
This fund (Vanguard High-Yield Corporate) offers a high monthly payment, but the payment effectively invades the principal. High-yield bonds sometimes default. If the fund doesn't wait for a default, it will sell downgraded bonds at a loss, so it might sell ten bonds worth $800 (with a $1000 par) and buy eight new bonds for $1000 each. Thus, if you spend all the distributions from a high-yield bond fund or portfolio, you will own fewer bonds next year, and this will be worse in an economic decline. Even if the distribution yield remains constant, the distributions will decline in dollar value.

You can see this effect by checking the price history of a high-yield bond fund; in the long run, the share price declines.
Wiki David Grabiner
dbr
Posts: 33846
Joined: Sun Mar 04, 2007 9:50 am

Re: Vanguard Funds that offer a monthly payment?

Post by dbr »

grabiner wrote: Tue Aug 25, 2020 11:08 am
KT1959 wrote: Sun Aug 23, 2020 11:59 amVWEHX
This fund (Vanguard High-Yield Corporate) offers a high monthly payment, but the payment effectively invades the principal. High-yield bonds sometimes default. If the fund doesn't wait for a default, it will sell downgraded bonds at a loss, so it might sell ten bonds worth $800 (with a $1000 par) and buy eight new bonds for $1000 each. Thus, if you spend all the distributions from a high-yield bond fund or portfolio, you will own fewer bonds next year, and this will be worse in an economic decline. Even if the distribution yield remains constant, the distributions will decline in dollar value.

You can see this effect by checking the price history of a high-yield bond fund; in the long run, the share price declines.
You can see what would have happened to a holding of VWEHX started in 1980 when the NAV was $9.50 and the yield was 11% until today when the NAV is $5.80 and the yield is 5%. The dividend went from $.09/mo to $.025/mo. Applying an inflation factor of about 3, the loss to principal is about a loss of 80% in real dollars and the loss to income was a loss of about 90% in real dollars.

If the dividend had been reinvested instead of spent the CAGR of the investment between 1985 and now would have been about 7.7% nominal.

So the lesson is basically about paying attention to yield, return, and whether or not withdrawals can be sustained. This is an example of why you don't make an income plan out of living off the dividends paid without looking closer at what you are doing.
hudson
Posts: 3398
Joined: Fri Apr 06, 2007 9:15 am

Re: Vanguard Funds that offer a monthly payment?

Post by hudson »

AlphaPilot wrote: Sun Aug 23, 2020 11:20 am Hey all,
I am looking into setting up some form of portfolio for a family member that wants to have monthly payments that they can use for some supplemental income to make up for them leaving a part-time job they held before. They have a nice nest egg, but I don't want them to fall for an annuity plan when I could see them doing just as well with something like a dividend fund maybe. The only request they had was that it was monthly instead of annually, so they could sort of just spend what they got that month instead of dividing it up.

Do any Vanguard funds jump out that would be good for this? I assume it needs to be a dividend or bond fund, or is there such a thing as a slowly depleting fund that sells off investments and stays tax-advantaged doing so?
Years ago, I had a friend that wanted to just turn over his holdings to someone who would just send him a check every month. He didn't want to mess with anything. You can lose a lot of money if you go that route. I think the optimal solution is to invest in a whatever funds make sense. At the end of every month, transfer the cash in the settlement fund to checking. If that's not enough, sell holdings and send to checking. A novice would think that that was very complicated until he/she did it for a few months; then it's easy.

My Friend: I'll bet he bought some kind of ugly annuity or has a bank or a local broker getting him the monthly check. That's very luxurious and very expensive. I'll never ask.
User avatar
grabiner
Advisory Board
Posts: 28296
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Vanguard Funds that offer a monthly payment?

Post by grabiner »

hudson wrote: Tue Aug 25, 2020 11:31 am Years ago, I had a friend that wanted to just turn over his holdings to someone who would just send him a check every month. He didn't want to mess with anything. You can lose a lot of money if you go that route.
There is actually a good way to do this: buy a single-premium immediate annuity. This will give you a check every month for the rest of your life, and more than you could get safely by withdrawing your own investments, because the payments expire upon your death,

While there are a lot of ugly annuities, SPIAs are simple, and thus hard to turn into bad products. You pay X dollars and receive Y dollars every month for the rest of your life; you can easily compare the value of Y from different providers.
Wiki David Grabiner
kabob
Posts: 117
Joined: Wed Oct 16, 2019 9:01 am
Location: Loudon, Tn

Re: Vanguard Funds that offer a monthly payment?

Post by kabob »

VanguardCorporate Longterm Bonds pay Monthly...
Both Etf(VCLT) and Admiral Mutual Fund(VLTCX)
I Like VCLT - good hangout for Dry Power and earn a few bucks too! plus a good shot for capital gains also.
Trader Joe
Posts: 2039
Joined: Fri Apr 25, 2014 6:38 pm

Re: Vanguard Funds that offer a monthly payment?

Post by Trader Joe »

AlphaPilot wrote: Sun Aug 23, 2020 11:20 am Hey all,
I am looking into setting up some form of portfolio for a family member that wants to have monthly payments that they can use for some supplemental income to make up for them leaving a part-time job they held before. They have a nice nest egg, but I don't want them to fall for an annuity plan when I could see them doing just as well with something like a dividend fund maybe. The only request they had was that it was monthly instead of annually, so they could sort of just spend what they got that month instead of dividing it up.

Do any Vanguard funds jump out that would be good for this? I assume it needs to be a dividend or bond fund, or is there such a thing as a slowly depleting fund that sells off investments and stays tax-advantaged doing so?
Yes, definitely. If monthly income is needed I highly recommend VWEHX:

https://investor.vanguard.com/mutual-fu ... file/VWEHX
hudson
Posts: 3398
Joined: Fri Apr 06, 2007 9:15 am

Re: Vanguard Funds that offer a monthly payment?

Post by hudson »

grabiner wrote: Tue Aug 25, 2020 7:41 pm
hudson wrote: Tue Aug 25, 2020 11:31 am Years ago, I had a friend that wanted to just turn over his holdings to someone who would just send him a check every month. He didn't want to mess with anything. You can lose a lot of money if you go that route.
There is actually a good way to do this: buy a single-premium immediate annuity. This will give you a check every month for the rest of your life, and more than you could get safely by withdrawing your own investments, because the payments expire upon your death,

While there are a lot of ugly annuities, SPIAs are simple, and thus hard to turn into bad products. You pay X dollars and receive Y dollars every month for the rest of your life; you can easily compare the value of Y from different providers.
I agree. I have no idea how large his holdings were. I guess that he could go with the state's max for the state guarantee association which is $300K for all life and annuities. If he was 70, that would give him$1680 per month for life. I realize that there's much more to know before buying a SPIA.
FactualFran
Posts: 1172
Joined: Sat Feb 21, 2015 2:29 pm

Re: Vanguard Funds that offer a monthly payment?

Post by FactualFran »

dbr wrote: Mon Aug 24, 2020 7:06 pm Ah, thanks. I know it was not working out very well to maintain the hoped for "annuity like" distribution.
The fund maintained the same monthly distribution per share from January to December of each year. A problem was that too few of the shareholders of the fund took the monthly payouts in cash.

According the release: "The fund has attracted a modest asset base ($1.9 billion) and many shareholders do not utilize the monthly payout feature, choosing instead to reinvest a large amount of their distribution."

It does not make sense for a fund to make monthly payouts that could exceed IRS requirements when many shareholders do not want the payouts.
hulburt1
Posts: 434
Joined: Tue Jul 15, 2014 9:17 pm

Re: Vanguard Funds that offer a monthly payment?

Post by hulburt1 »

Every week I have $1000 sent from my MM to my checking. I can start it and stop it. Vanguard takes out the tax's that I want taken out. I have been doing it this way for years.
Post Reply