VTHRX idea as Target Retirement funds

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Abk911
Posts: 21
Joined: Thu Aug 09, 2018 1:22 pm

VTHRX idea as Target Retirement funds

Post by Abk911 » Thu Aug 09, 2018 8:21 pm

I wanted to know from some coaches here if my below strategy is a good way to approach my plan.

Age 40.
plan to retire in 2045 (for 401k i invst in Vanguard 2045 Fund and plan to continue)
however want to invest in RIRA with the option to have those funds available for daughters college in 2030 if need be.
starting 2018 will do every year 5500 investment in RIRA

So with that in mind would it be prudent to consider a Vanguard 2030 VTHRX retirement fund as an investment option for RIRA... with that i believe they automatically rebalance as time passes on and that would take care of dissolving some risks rather than choosing multiple funds myself to balance stocks and bonds.

PFInterest
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Joined: Sun Jan 08, 2017 12:25 pm

Re: VTHRX idea as Target Retirement funds

Post by PFInterest » Thu Aug 09, 2018 8:31 pm

You should pick based on underlying AA, not the date.

blevine
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Location: New York

Re: VTHRX idea as Target Retirement funds

Post by blevine » Thu Aug 09, 2018 8:41 pm

Idea is sound, though when the time comes you will want to consider moving to more or less aggressive once you decide on purpose. Later or earlier year.

rkhusky
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Re: VTHRX idea as Target Retirement funds

Post by rkhusky » Fri Aug 10, 2018 8:46 am

You will be taking on a lot more risk than that of the typical 529 plans. A retirement account is expected to need to last 30+ years, while a college account will be spent in 4 or so years. Accordingly, Vanguard's Target Retirement accounts are about 50/50 stocks/bonds at the target date and glide to 30/70 over the following 7 years. Vanguard's moderate 529 accounts are 75% bonds and 25% cash at age 18, i.e. no stocks. Their aggressive option has only 10% stocks at age 18.

Some people don't mind taking that much risk with their college accounts because they have plenty of money to cover college even if the market tanks. Others not so much.

If you want to emulate Vanguard's 529 with the TR funds, you could, for example, start with TR 2030 and then after a couple years move to TR 2025, and then to TR 2020, and then to TR Income, and finally to Total Bond (or Total Bond + Prime Money Market).

megabad
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Re: VTHRX idea as Target Retirement funds

Post by megabad » Fri Aug 10, 2018 9:59 am

rkhusky wrote:
Fri Aug 10, 2018 8:46 am
You will be taking on a lot more risk than that of the typical 529 plans.
I agree. I would probably start out now in Lifestrategy Moderate Growth, switch to Conservative Income in 2025 or so and, as you approach 2030, most the money you are certain to use for college should probably get moved into MM or something similar as even Target Retirement Income is fairly aggressive for a 1-4 year drawdown. Obviously I would project that this would substantially decrease the funds available in the Roth for retirement. As such, as soon as you figure out what you don't need for college, I would invest that portion of the funds identically to the rest of your retirement assets.

Abk911
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Joined: Thu Aug 09, 2018 1:22 pm

Re: VTHRX idea as Target Retirement funds

Post by Abk911 » Fri Aug 10, 2018 10:19 am

Thank you... if i am going aggressive with a retirement date plan then i relooked at some funds.
i am also reading and digesting most of your views. i saw two funds form vanguard that are 3/5 on risk.
VBINX and VSMGX... which one would be a better fit based on the above strategy as they seem to have a 60pct ish stock and rest bond.
May be then i can reallocate in 2025 ... and move to even more conservative? assuming one can buy and sell within the ira without any penalties.

Texanbybirth
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Joined: Tue Apr 14, 2015 12:07 pm

Re: VTHRX idea as Target Retirement funds

Post by Texanbybirth » Fri Aug 10, 2018 10:21 am

Abk911 wrote:
Fri Aug 10, 2018 10:19 am
Thank you... if i am going aggressive with a retirement date plan then i relooked at some funds.
i am also reading and digesting most of your views. i saw two funds form vanguard that are 3/5 on risk.
VBINX and VSMGX... which one would be a better fit based on the above strategy as they seem to have a 60pct ish stock and rest bond.
May be then i can reallocate in 2025 ... and move to even more conservative? assuming one can buy and sell within the ira without any penalties.
Depends on whether you want Int'l (stock and bond) exposure. We invest in VSMGX monthly for the same purpose as you are considering it.

Generally, you can buy and sell to your heart's content in an IRA.

rkhusky
Posts: 5547
Joined: Thu Aug 18, 2011 8:09 pm

Re: VTHRX idea as Target Retirement funds

Post by rkhusky » Fri Aug 10, 2018 11:19 am

Abk911 wrote:
Fri Aug 10, 2018 10:19 am
Thank you... if i am going aggressive with a retirement date plan then i relooked at some funds.
i am also reading and digesting most of your views. i saw two funds form vanguard that are 3/5 on risk.
VBINX and VSMGX... which one would be a better fit based on the above strategy as they seem to have a 60pct ish stock and rest bond.
May be then i can reallocate in 2025 ... and move to even more conservative? assuming one can buy and sell within the ira without any penalties.
No penalties or fees for buying/selling within an IRA. But you are restricted by Vanguard from buying, via the web, a fund that you sold less than 60 days prior.

It seems easiest to me to create a glide path with the TR funds, since you have more variety in the stock/bond ratios. To see Vanguard's allocations for their 529 portfolios, see: https://investor.vanguard.com/529-plan/ ... ed-options

It is often recommended here to make sure that your retirement needs are taken care of before contributing to a college fund. You can always borrow to finance college, but it is unlikely you will be able to borrow to finance your desired retirement lifestyle.

Abk911
Posts: 21
Joined: Thu Aug 09, 2018 1:22 pm

Re: VTHRX idea as Target Retirement funds

Post by Abk911 » Fri Aug 10, 2018 12:34 pm

rkhusky wrote:
Fri Aug 10, 2018 11:19 am
Abk911 wrote:
Fri Aug 10, 2018 10:19 am
Thank you... if i am going aggressive with a retirement date plan then i relooked at some funds.
i am also reading and digesting most of your views. i saw two funds form vanguard that are 3/5 on risk.
VBINX and VSMGX... which one would be a better fit based on the above strategy as they seem to have a 60pct ish stock and rest bond.
May be then i can reallocate in 2025 ... and move to even more conservative? assuming one can buy and sell within the ira without any penalties.
No penalties or fees for buying/selling within an IRA. But you are restricted by Vanguard from buying, via the web, a fund that you sold less than 60 days prior.

It seems easiest to me to create a glide path with the TR funds, since you have more variety in the stock/bond ratios. To see Vanguard's allocations for their 529 portfolios, see: https://investor.vanguard.com/529-plan/ ... ed-options

It is often recommended here to make sure that your retirement needs are taken care of before contributing to a college fund. You can always borrow to finance college, but it is unlikely you will be able to borrow to finance your desired retirement lifestyle.
your last line got me rethinking everything. may be i will do a 50/50. I am doing one ira for me and one for wife. I will cast one towards education and one towards retirement.

What are preferred / popular vanguard options for retirement RIRA that you have seen folks use? i AM 40.

rkhusky
Posts: 5547
Joined: Thu Aug 18, 2011 8:09 pm

Re: VTHRX idea as Target Retirement funds

Post by rkhusky » Fri Aug 10, 2018 8:47 pm

Abk911 wrote:
Fri Aug 10, 2018 12:34 pm
What are preferred / popular vanguard options for retirement RIRA that you have seen folks use? i AM 40.
TR2045 looks like a reasonable choice since you are already using it in your 401k.

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