72 year old, wanting to put investments in "auto pilot" mode, please advise

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LearningAlot
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72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by LearningAlot »

I have a 72 year old relative who has his nest egg in a Vanguard 401K. He comfortably lives on social security,
plus 3% from his nest egg. He has been maintaining an asset allocation of 40% equities and
60% bonds. The equities are maintained at 75% domestic and 25% international. The bonds are in an
intermediated bond fund with a duration of 6 years.

He wants to simplify things going forward and doesn't want to pay someone to manage things for him. He is
thinking about putting everything in the following Vanguard target date fund. He plans to put anything in excess
of his RMD, beyond what he spends, in a money market fund at his bank.

Target Retirement 2015 Trust Plus:
The allocation between funds and asset classes automatically becomes more conservative over time.
Expense ratio 0.06%
Fund total net assets $11.9 billion

Portfolio composition:
Vanguard Total Bond Market II Index Fund Institutional Shares 34.9%
Vanguard Total Stock Market Index Fund Institutional Plus Shares 20.8%
Vanguard Total International Bond Index Fund Institutional Shares 15.5%
Vanguard Short-Term Inflation-Protected Securities Index Fund Institutional Shares 14.8%
Vanguard Total International Stock Index Fund Institutional Plus Shares 11.2%
Vanguard Institutional Total International Stock Market Index Trust II 2.8%

He asked me for advice and I told him I would reach out to the Boglehead community and
get their feedback for him.

Thanks in advance for any feedback!
Living Free
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by Living Free »

LearningAlot wrote: Wed Oct 21, 2020 8:29 am I have a 72 year old relative who has his nest egg in a Vanguard 401K. He comfortably lives on social security,
plus 3% from his nest egg. He has been maintaining an asset allocation of 40% equities and
60% bonds. The equities are maintained at 75% domestic and 25% international. The bonds are in an
intermediated bond fund with a duration of 6 years.

He wants to simplify things going forward and doesn't want to pay someone to manage things for him. He is
thinking about putting everything in the following Vanguard target date fund. He plans to put anything in excess
of his RMD, beyond what he spends, in a money market fund at his bank.

Target Retirement 2015 Trust Plus:
The allocation between funds and asset classes automatically becomes more conservative over time.
Expense ratio 0.06%
Fund total net assets $11.9 billion

Portfolio composition:
Vanguard Total Bond Market II Index Fund Institutional Shares 34.9%
Vanguard Total Stock Market Index Fund Institutional Plus Shares 20.8%
Vanguard Total International Bond Index Fund Institutional Shares 15.5%
Vanguard Short-Term Inflation-Protected Securities Index Fund Institutional Shares 14.8%
Vanguard Total International Stock Index Fund Institutional Plus Shares 11.2%
Vanguard Institutional Total International Stock Market Index Trust II 2.8%

He asked me for advice and I told him I would reach out to the Boglehead community and
get their feedback for him.

Thanks in advance for any feedback!
Sure, the vanguard target date funds are great. If he'd prefer to stay at 40% equity to 60% bonds, there is a lifestrategy fund from vanguard that does that. It would probably be 40% international stock but that is reasonable from my standpoint.
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dogagility
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by dogagility »

Living Free wrote: Wed Oct 21, 2020 8:32 am Sure, the vanguard target date funds are great. If he'd prefer to stay at 40% equity to 60% bonds, there is a lifestrategy fund from vanguard that does that. It would probably be 40% international stock but that is reasonable from my standpoint.
+1
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retired@50
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by retired@50 »

LearningAlot wrote: Wed Oct 21, 2020 8:29 am
Target Retirement 2015 Trust Plus:
The allocation between funds and asset classes automatically becomes more conservative over time.
...
He asked me for advice and I told him I would reach out to the Boglehead community and
get their feedback for him.

Thanks in advance for any feedback!
Keep in mind that all Vanguard target date funds continue to grow more conservative over time, as you stated above. The end result of this journey is to what is currently called the Vanguard Target Retirement Income Fund, which is about 30% equity / 70% bonds. I suspect the 2015 fund will be in this position in another few years.

If you want to maintain a consistent asset allocation, using a Vanguard LifeStrategy fund would be a good choice.

Regards,
This is one person's opinion. Nothing more.
pkcrafter
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by pkcrafter »

Fund total net assets $11.9 billion

He comfortably lives on social security, plus 3% from his nest egg.


?????????
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deikel
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by deikel »

pkcrafter wrote: Wed Oct 21, 2020 3:01 pm
Fund total net assets $11.9 billion

He comfortably lives on social security, plus 3% from his nest egg.


?????????
I had the same thought....is the billion a typo ? Even a million would be rather insane in terms of spending 3% of it....

Why does he want to change anything ? Leave it as is, it has worked before....or go with a Vanguard advisory for small fee and have it simplified. I would be most concerned about tax efficiency and estate planning....but if it is 11.9 billion I might not even care :-)
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ruralavalon
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by ruralavalon »

In my opinion his plan, everything in Vanguard Target Retirement 2015 Trust Plus (pdf fact sheet), is fine.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
MathWizard
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by MathWizard »

deikel wrote: Wed Oct 21, 2020 3:08 pm
pkcrafter wrote: Wed Oct 21, 2020 3:01 pm
Fund total net assets $11.9 billion

He comfortably lives on social security, plus 3% from his nest egg.


?????????
I had the same thought....is the billion a typo ? Even a million would be rather insane in terms of spending 3% of it....

Why does he want to change anything ? Leave it as is, it has worked before....or go with a Vanguard advisory for small fee and have it simplified. I would be most concerned about tax efficiency and estate planning....but if it is 11.9 billion I might not even care :-)
That is supposed to be what the fund has for assets, not what the OP has.

I don't see $11.9 billion though, I see $ 3.1 Billion, unless he means a different 2015 target retirement fund.

https://institutional.vanguard.com/iipp ... FS1652.pdf
Beehave
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by Beehave »

If the fund matches his asset allocation targets it looks fine to me. It may be preferable to him relative to a Life Strategy fund because of its inflation-protected bond content, and I think that is a very solid reason to favor this fund, in his position.
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by Beehave »

Edited out to remove duplicate.
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GerryL
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by GerryL »

Regarding where he plans to put the excess from his RMD: If "his bank" is brick and mortar, you might want to suggest that he open an account at an online bank where he will get a better interest rate. Not that interest rates are great anywhere these days, but no sense throwing money away.
Northern Flicker
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by Northern Flicker »

One difference between LifeStrategy and Target Retirement funds is that the TR funds incorporate short-term TIPS when close to retirement.

I think the institutional TR fund is good-- the extra diversification to TIPS and lower ER are advantages. RMD funds not spent could be deposited to a taxable account holding VTSAX, though that is no longer fully autopilot.
Risk is not a guarantor of return.
retiredjg
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by retiredjg »

If he wants to leave the money in the 401k and if he wants to shift to 35% stock and 65% bonds, that fund mentioned is a good choice.
RetiredCSProf
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by RetiredCSProf »

deikel wrote: Wed Oct 21, 2020 3:08 pm
pkcrafter wrote: Wed Oct 21, 2020 3:01 pm
Fund total net assets $11.9 billion

He comfortably lives on social security, plus 3% from his nest egg.


?????????
I had the same thought....is the billion a typo ? Even a million would be rather insane in terms of spending 3% of it....

Why does he want to change anything ? Leave it as is, it has worked before....or go with a Vanguard advisory for small fee and have it simplified. I would be most concerned about tax efficiency and estate planning....but if it is 11.9 billion I might not even care :-)
+1

I am 72 years old, also, and I don't understand this at all. The biggest risk is the potential tax impact to his heirs if this is $11.9 billion in tax-deferred (I am assuming the 401K is tax-deferred). Unless, he is planning to donate it all to charity. OTOH, if he's single and unattached ... :greedy
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One Ping
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by One Ping »

pkcrafter wrote: Wed Oct 21, 2020 3:01 pm
Fund total net assets $11.9 billion

He comfortably lives on social security, plus 3% from his nest egg.


?????????
1.19 Million?
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Tattarrattat
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by Tattarrattat »

He's been doing a great job to this point. Putting the money in the 2015 fund will be an excellent choice as well. Shouldn't end up very different than what he's been doing already, with less work and attention required.
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SquawkIdent
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by SquawkIdent »

Lifestrategy conservative growth or Wellesley admiral.

Others suggestions made are great too. Lots of options to simplify this.
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ruralavalon
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by ruralavalon »

RetiredCSProf wrote: Wed Oct 21, 2020 4:26 pm
deikel wrote: Wed Oct 21, 2020 3:08 pm
pkcrafter wrote: Wed Oct 21, 2020 3:01 pm
Fund total net assets $11.9 billion

He comfortably lives on social security, plus 3% from his nest egg.


?????????
I had the same thought....is the billion a typo ? Even a million would be rather insane in terms of spending 3% of it....

Why does he want to change anything ? Leave it as is, it has worked before....or go with a Vanguard advisory for small fee and have it simplified. I would be most concerned about tax efficiency and estate planning....but if it is 11.9 billion I might not even care :-)
+1

I am 72 years old, also, and I don't understand this at all. The biggest risk is the potential tax impact to his heirs if this is $11.9 billion in tax-deferred (I am assuming the 401K is tax-deferred). Unless, he is planning to donate it all to charity. OTOH, if he's single and unattached ... :greedy
One Ping wrote: Wed Oct 21, 2020 5:10 pm
pkcrafter wrote: Wed Oct 21, 2020 3:01 pm
Fund total net assets $11.9 billion

He comfortably lives on social security, plus 3% from his nest egg.


?????????
1.19 Million?
That's not his personal investment in the trust, it's the total size of the trust. And the correct number is actually $3.1 Billion.

Vanguard Target Retirement 2015 Trust Plus (pdf fact sheet).
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Outer Marker
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by Outer Marker »

The Vanguard Target Date and Lifestrategy funds are reasonable choices. It's a bit frustrating that Vanguard force feeds investors, particularly older investors, such a heavy dose of international bonds and equities.
bhjjk19
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by bhjjk19 »

I agree 100% re: force feed international Stocks and Bonds.
NYCPete
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by NYCPete »

LearningAlot wrote: Wed Oct 21, 2020 8:29 am I have a 72 year old relative who has his nest egg in a Vanguard 401K. He comfortably lives on social security,
plus 3% from his nest egg. He has been maintaining an asset allocation of 40% equities and
60% bonds. The equities are maintained at 75% domestic and 25% international. The bonds are in an
intermediated bond fund with a duration of 6 years.

He wants to simplify things going forward and doesn't want to pay someone to manage things for him. He is
thinking about putting everything in the following Vanguard target date fund. He plans to put anything in excess
of his RMD, beyond what he spends, in a money market fund at his bank.

Target Retirement 2015 Trust Plus:
The allocation between funds and asset classes automatically becomes more conservative over time.
Expense ratio 0.06%
Fund total net assets $11.9 billion

Portfolio composition:
Vanguard Total Bond Market II Index Fund Institutional Shares 34.9%
Vanguard Total Stock Market Index Fund Institutional Plus Shares 20.8%
Vanguard Total International Bond Index Fund Institutional Shares 15.5%
Vanguard Short-Term Inflation-Protected Securities Index Fund Institutional Shares 14.8%
Vanguard Total International Stock Index Fund Institutional Plus Shares 11.2%
Vanguard Institutional Total International Stock Market Index Trust II 2.8%

He asked me for advice and I told him I would reach out to the Boglehead community and
get their feedback for him.

Thanks in advance for any feedback!
My father is a bit older (83) and has followed a very similar path. His primary income is from SS and a small pension. He put all his tax advantaged accounts into the Vanguard Target Retirement 2005 back in the mid to late 2000s (maybe 2006 or 2007). It eventually shifted over to the Vanguard Target Retirement Income Fund. He doesn't really need all of his RMD every year, and so has it go to a Vanguard Money Market Fund account. He's been very happy with the TRF allocation, and he mentions being relieved when he checks his balances every year. Interestingly, he said to me over this past summer that the balance is almost identical to what it was back in 2006/2007, even after taking into account all the RMDs and market swings.

Assuming everything is in tax advantaged accounts, and that your relative understands the 2015 fund will eventually get more conservative and turn into the Income fund, I think this plan is totally reasonable. Sure, your relative could nibble at the edges, and consider a lifestrategy fund with a fixed allocation, or marinate more on what exact allocation he'll be comfortable with, but I don't think suggesting that is going to be helpful here. And if he wants autopilot (or simplicity), I don't think he'll want to do that anyway. He's come up with a great plan that utilizes low cost index funds, with an allocation that is broadly diversified. More importantly, he came up with it. If you try to sway him to something new, then its your credibility and relationship on the line. Better to give a well thought out plan the positive reinforcement it deserves! :D

Best,
Peter
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha
Northern Flicker
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by Northern Flicker »

Outer Marker wrote: Thu Oct 22, 2020 9:34 am The Vanguard Target Date and Lifestrategy funds are reasonable choices. It's a bit frustrating that Vanguard force feeds investors, particularly older investors, such a heavy dose of international bonds and equities.
Force feeds? They don't force you to use the products. Wellesley Income Fund, Balanced Index Fund, Tax-Managed Balanced Fund, and the Wellington Fund are other options either with zero or very minimal non-US assets.

VTINX Target Retirement Income is 27% non-US assets in total.
Risk is not a guarantor of return.
rixer
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by rixer »

I'm also 72 and I'm using the lifestrategy conservative growth index fund. It's as autopilot as it gets and remains a constant AA. So far so good.
sycamore
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by sycamore »

Northern Flicker wrote: Thu Oct 22, 2020 2:21 pm
Outer Marker wrote: Thu Oct 22, 2020 9:34 am The Vanguard Target Date and Lifestrategy funds are reasonable choices. It's a bit frustrating that Vanguard force feeds investors, particularly older investors, such a heavy dose of international bonds and equities.
Force feeds? They don't force you to use the products. Wellesley Income Fund, Balanced Index Fund, Tax-Managed Balanced Fund, and the Wellington Fund are other options either with zero or very minimal non-US assets.

VTINX Target Retirement Income is 27% non-US assets in total.
I personally prefer a lower allocation to international stocks and bonds than what Vanguard has in Target Date. However the Vanguard Total International Bond ETF has actually performed a bit better than Vanguard Total Bond Market ETF since inception. Better CAGR, less of a max drawdown, less volatility. Not to confuse outcome with strategy -- as the saying goes -- but hard to argue with success.
inbox788
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by inbox788 »

Northern Flicker wrote: Thu Oct 22, 2020 2:21 pm
Outer Marker wrote: Thu Oct 22, 2020 9:34 am The Vanguard Target Date and Lifestrategy funds are reasonable choices. It's a bit frustrating that Vanguard force feeds investors, particularly older investors, such a heavy dose of international bonds and equities.
Force feeds? They don't force you to use the products. Wellesley Income Fund, Balanced Index Fund, Tax-Managed Balanced Fund, and the Wellington Fund are other options either with zero or very minimal non-US assets.

VTINX Target Retirement Income is 27% non-US assets in total.
FYI, international bonds are largely developed Europe and Japan. Interestingly, includes United States (what, why?) and Supranational (what does this mean?).
Vanguard Total International Bond Index Fund Admiral Shares (VTABX)
Market allocation (% of bond)
as of 09/30/2020

Japan 17.5%
France 12.1%
Germany 10.2%
Italy 7.7%
United Kingdom 7.0%
Canada 5.7%
Spain
Netherlands
United States 3.6%
Australia
Korea
Supranational 2.5%
And as far as the international stocks, here's the latest top 10, which is much more diversified than the US, with only 11.1% (that's about the top 3 in the US market cap weight).
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
Month-end ten largest holdings as of 09/30/2020
Rank Holdings
1 Alibaba Group Holding Ltd.
2 Tencent Holdings Ltd.
3 Taiwan Semiconductor Manufacturing Co. Ltd.
4 Nestle SA
5 Samsung Electronics Co. Ltd.
6 Roche Holding AG
7 Novartis AG
8 SAP SE
9 Toyota Motor Corp.
10 Unilever
Ten largest holdings = 11.1% of total net assets
Northern Flicker
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Re: 72 year old, wanting to put investments in "auto pilot" mode, please advise

Post by Northern Flicker »

The supranational bonds in VTABX are likely bonds issued by the Asia Development Bank or European Investment Bank with principal proceeds benefitting multiple countries. Some US companies like I think Amazon and Apple have issued bonds outside the US and not denominated in USD. If a Vanguard bond index fund were to hold these, I believe it would be VTABX/BNDX.
Risk is not a guarantor of return.
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