A la carte vs VTINX (Vanguard Target Retirement Income Fund)

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nyclon
Posts: 299
Joined: Fri Oct 02, 2015 5:30 pm

A la carte vs VTINX (Vanguard Target Retirement Income Fund)

Post by nyclon » Tue Apr 24, 2018 8:18 pm

Would appreciate the forum's feedback on the following scenario.

Age: 80s, MFJ
SS income: $2.3k/mo, heavily weighted toward one spouse
Investable cash, all taxable: $150k
No other assets

Idea is to draw $1.3k/mo from taxable to cover living expenses after SS for a total of $3.6k/mo to spend.

Considering putting all of the $150k into VTINX (Vanguard Target Retirement Income Fund)

1. Is there anything wrong with this idea from a tax perspective?
2. Would it be better to a la carte the portfolio? Uncertain if this will cause any tax inefficiency due to rebalancing (likely once a year)
3. Not concerned about the difference in fees.
4. Anything else?

Thanks

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Taylor Larimore
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Posts: 27445
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: A la carte vs VTINX (Vanguard Target Retirement Income Fund)

Post by Taylor Larimore » Tue Apr 24, 2018 8:50 pm

nyclon wrote:
Tue Apr 24, 2018 8:18 pm
Would appreciate the forum's feedback on the following scenario.

Age: 80s, MFJ
SS income: $2.3k/mo, heavily weighted toward one spouse
Investable cash, all taxable: $150k
No other assets

Idea is to draw $1.3k/mo from taxable to cover living expenses after SS for a total of $3.6k/mo to spend.

Considering putting all of the $150k into VTINX (Vanguard Target Retirement Income Fund)

1. Is there anything wrong with this idea from a tax perspective?
2. Would it be better to a la carte the portfolio? Uncertain if this will cause any tax inefficiency due to rebalancing (likely once a year)
3. Not concerned about the difference in fees.
4. Anything else?

Thanks
nyclon:

When my wife and I reached 80 in good health, we purchased two single-premium life-income annuities (SPIAs) and are very happy that we did. You may be in a similar situation.

I checked with www.immediateannuities.com and learned that an 80 year old couple with a $100,000 single premium can receive $8,484 (8.5%) a year for as long as either is alive.

No other investment can guarantee a larger lifetime income.

SPIAs are the "good" annuity.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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David Jay
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Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: A la carte vs VTINX (Vanguard Target Retirement Income Fund)

Post by David Jay » Tue Apr 24, 2018 9:12 pm

I do not believe that an 11% withdrawal rate is sustainable. Something needs adjustment. You say you have no other assets, do you rent?
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

nyclon
Posts: 299
Joined: Fri Oct 02, 2015 5:30 pm

Re: A la carte vs VTINX (Vanguard Target Retirement Income Fund)

Post by nyclon » Tue Apr 24, 2018 9:22 pm

Taylor Larimore wrote:
Tue Apr 24, 2018 8:50 pm
nyclon wrote:
Tue Apr 24, 2018 8:18 pm
Would appreciate the forum's feedback on the following scenario.

Age: 80s, MFJ
SS income: $2.3k/mo, heavily weighted toward one spouse
Investable cash, all taxable: $150k
No other assets

Idea is to draw $1.3k/mo from taxable to cover living expenses after SS for a total of $3.6k/mo to spend.

Considering putting all of the $150k into VTINX (Vanguard Target Retirement Income Fund)

1. Is there anything wrong with this idea from a tax perspective?
2. Would it be better to a la carte the portfolio? Uncertain if this will cause any tax inefficiency due to rebalancing (likely once a year)
3. Not concerned about the difference in fees.
4. Anything else?

Thanks
nyclon:

When my wife and I reached 80 in good health, we purchased two single-premium life-income annuities (SPIAs) and are very happy that we did. You may be in a similar situation.

I checked with www.immediateannuities.com and learned that an 80 year old couple with a $100,000 single premium can receive $8,484 (8.5%) a year for as long as either is alive.

No other investment can guarantee a larger lifetime income.

SPIAs are the "good" annuity.

Best wishes.
Taylor
Thank you Taylor. I am not familiar with these products and will research. If I understand correctly, and will research, but if both owners of the SPIA pass away, entire premium is gone? So the tradeoff is guaranteed income stream vs not getting the principal back?

nyclon
Posts: 299
Joined: Fri Oct 02, 2015 5:30 pm

Re: A la carte vs VTINX (Vanguard Target Retirement Income Fund)

Post by nyclon » Tue Apr 24, 2018 9:24 pm

David Jay wrote:
Tue Apr 24, 2018 9:12 pm
I do not believe that an 11% withdrawal rate is sustainable. Something needs adjustment. You say you have no other assets, do you rent?
The scenario would be to rent. No other assets.

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Taylor Larimore
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Posts: 27445
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

SPIAs for a guaranteed lifetime income?

Post by Taylor Larimore » Tue Apr 24, 2018 10:21 pm

Thank you Taylor. I am not familiar with these products and will research. If I understand correctly, and will research, but if both owners of the SPIA pass away, entire premium is gone? So the tradeoff is guaranteed income stream vs not getting the principal back?
nyclon:

Your analysis is mostly correct. But consider:

When you have a low net worth, you cannot afford to lose. Investing in the stock market can be very risky so there is no assurance you WILL get the principal back.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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