For IRA with RMD - Schwab Target Index?

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For IRA with RMD - Schwab Target Index?

Post by PickitPaul » Mon Feb 12, 2018 6:36 pm

Schwab Target 2010 Index Fund - SWYAX (about 38% Stock, the rest is bonds / cash) - would this be a good choice for an IRA that has RMD's being taken out of? I was reading about Mr. Bogle saying that the Total Bond Index Fund has too much exposure in US Treasury since the '08 downturn. I was going to get Schwab's version of the total bond index for the bulk of the IRA, and 30% of the Schwab Total Stock Market index, but it looks like I can get more diverse bond holdings and it is balanced for you with the SWYAX. Any thoughts on doing this?

I guess one downside is that if RMD's are being taken every year, I would have a choice to sell either the bond or stock total index fund, whereas with the Target Index that gets auto rebal. would have no choice?

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Re: For IRA with RMD - Schwab Target Index?

Post by Watty » Tue Feb 13, 2018 7:13 am

It sounds like you are overthinking this. The target date fund is really just about the same thing as the mix of stock and bonds you were talking about, but the target date fund is just on autopilot. When you need to take the RMD you just take it out of the target date fund.

I would just go with the target date fund, in the right situation they are a great choice. The main reasons not to use one are if you also have retirement money in a taxable account and you have to worry about tax efficiency, or if you don't have access to a good one in your 401k.

If for some reason you want to have a higher or lower asset allocation of stocks and bonds you can buy a different date fund.

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Re: For IRA with RMD - Schwab Target Index?

Post by dbr » Tue Feb 13, 2018 10:08 am

Taking RMDs has nothing to do with what asset allocation to hold in the IRA. An RMD is just moving money from the IRA to a taxable account while doing whatever makes sense to rebalance the overall asset allocation over all accounts.

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