Target date fund income

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stocknoob4111
Posts: 837
Joined: Sun Jan 07, 2018 12:52 pm

Target date fund income

Post by stocknoob4111 » Sat Nov 16, 2019 12:21 pm

Just curious about this, I backtested this target date fund FFFFX (Fidelity Freedom 2040) and the income on a $500,000 balance starting 2018 shows as $34,242 for 2018 and $20,974 for 2019. Does this seem right? Is all of this income taxed? $34K of taxable income seems astonishingly high. I don't hold this fund but just checking it's profile for someone else.

As a general concept - do you recommend Target Date funds be held in a taxable account?

https://tinyurl.com/u7og3qc

retired@50
Posts: 677
Joined: Tue Oct 01, 2019 2:36 pm

Re: Target date fund income

Post by retired@50 » Sat Nov 16, 2019 12:28 pm

stocknoob4111 wrote:
Sat Nov 16, 2019 12:21 pm
Just curious about this, I backtested this target date fund FFFFX (Fidelity Freedom 2040) and the income on a $500,000 balance starting 2018 shows as $34,242 for 2018 and $20,974 for 2019. Does this seem right? Is all of this income taxed? $34K of taxable income seems astonishingly high. I don't hold this fund but just checking it's profile for someone else.

As a general concept - do you recommend Target Date funds be held in a taxable account?

https://tinyurl.com/u7og3qc
The change in overall value of the portfolio, from $500,000 to $534,242, isn't necessarily all taxed. Some of that change will come from stock price appreciation, and some will come from stock dividends, and some will come from interest on the bonds in the fund. So, IF you were a taxable account holder during this time, you would have received a 1099-DIV statement in the mail that reveals what portion of this would be added to your 1040.

To find out the actual numbers, you might be able to analyze the "distributions" information for the funds in question on the respective websites, Vanguard.com and/or Fidelity.com.

Regards,

Topic Author
stocknoob4111
Posts: 837
Joined: Sun Jan 07, 2018 12:52 pm

Re: Target date fund income

Post by stocknoob4111 » Sat Nov 16, 2019 1:05 pm

ah, I did not notice that the income listed was almost all of the increase in portfolio value, I just think that the data in PV is incorrect as it lists $34,242 as "Portfolio income" which can't possibly be true as it's almost 100% of the appreciation of the portfolio itself. The Vanguard target date fund's income of $11,280 (about 2.2%) looks correct, not quite sure why this fund's income numbers are so off.

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