Step daughter wants help

[Badger]

My step daughter (50) has asked for my help to start investing some of our annual gift, $15k, to her. The gift is in 2 parts - half for Christmas for both of them and the other half for her on her birthday. She would like to put her birthday money aside for retirement. She is a teacher and I don't think she has a 403b. Her pension will be from the state for maybe 20+ years of service if she stays for the next 10 years.



She has $10k and doesn't know anything about how to invest. Her husband knows less. Although my wife and I have done well for ourselves over the years I think a good portion has been luck and not being aggressive or greedy so maybe not the best source of investment knowledge but we are the ones she trusts.



She is not interested in all the technical parameters of investing but I plan to share what little I know. I think she plans to keep this her own retirement stash.



One plan would be for her to open a Roth (preferred) or traditional IRA with the money. Since I am somewhat familiar with Vanguard I was thinking of



Target Retirement 2035 or
Total Stock Mkt Index or
500 Index or
Wellesley or
Wellington



If it is a stock fund I would need suggestions on something for balance. The investments would need to be something she would add to each year and leave alone.



What would you do in this situation?


Cheers!

 

[Walt34]

In the rare times when I'm asked, I say "If you do nothing else, pick a target date fund and put money in that". It's about as simple as it gets, easy to do and understand.

Or go 50/50 Wellesely and Wellington. Also very simple & easy.

 

[MichaelB]

In the rare times when I'm asked, I say "If you do nothing else, pick a target date fund and put money in that". It's about as simple as it gets, easy to do and understand.

Or go 50/50 Wellesely and Wellington. Also very simple & easy.

I would do this.

 

[braumeister]

I would also give her a copy of Millionaire Teacher and ask her to read it.

 

[HI Bill]

I'm less conservative than others, so I'd go with:

Vanguard Target Retirement 2040 Fund (VFORX).

 

[HadEnuff]

In the rare times when I'm asked, I say "If you do nothing else, pick a target date fund and put money in that". It's about as simple as it gets, easy to do and understand.

Or go 50/50 Wellesely and Wellington. Also very simple & easy.

I would do this.

I would also give her a copy of Millionaire Teacher and ask her to read it.

yep, yep, and yep.

And she is lucky to have such caring parents.

 

[pb4uski]

Great plan overall.

Any idea what her tax bracket is? If it is 12% or less (less than $103k for a couple) then I would favor the Roth over the tIRA.

Most of the Vanguard balanced funds are good. I happen to like the STAR Fund and it has a great record but it is hard to go wrong with Wellington or wWellesley.

 

[euro]

Is she sure that she doesn't have access to a 403 plan? I'm asking because that would probably be the only way to stash the entire 10K. Otherwise, she'll have to do $7k this year and then wait until 2020 for the other 3k. Or set up both, an IRA and a taxable brokerage account

I second HNL Bill's suggestion of Vanguard Target Retirement 2040 Fund (VFORX) - just to keep it as simple as possible.

 

[Chuckanut]

Is she sure that she doesn't have access to a 403 plan?

She might, but these school 403b plans are often very poor. Mine had sales charges (really!), high fees, and fund total returns that did not come near matching the indexes. The only no-load fund they had was a money market fund!

 

[youbet]

I thought Wellington was still closed to new investors. Has that status changed?

 

[Badger]

Thank you everyone. Especially from so many of whom I respect their opinion/guidance. I think the easiest for her understand would be the target retirement fund although I will give her the option of Wellesley or Wellington since she may want to copy what I or my wife have in our IRAs.
I also ordered the Millionaire Teacher to give her. I will have to read it first so if she has questions I can be consistent with my answers. Thank you for that recommendation.
Cheers!

 

[Badger]

I thought Wellington was still closed to new investors. Has that status changed?

I will give Vanguard a call and check on this.


Cheers!

 

[mrfeh]

Target date fund would be fine.

I suggest you and your daughter read this: https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

 

[jIMOh]

I would just do Wellesley. Stay simple, stay conservative... it is about steady growth, she could panic in anything with more equity exposure.
I would put some in Roth, some in taxable account, when she comments about claiming on her income taxes, that is when she is ready to learn more.

 

[rayvt]

A Vanguard LifeStrategy fund. https://investor.vanguard.com/mutual-funds/lifestrategy/#/ I like the Vanguard LifeStrategy Growth Fund (VASGX) 80/20, well diversified.


Just because a fund has a name like "Target Retirement 20xx" does not mean that it should be used for that. The name of the fund is just a marketing strategy. Stay away from picking an investment because of its name.

 

[chris2008]

The blog of Millionaireeducator.com might also be interesting for her.

 

[pb4uski]

I thought Wellington was still closed to new investors. Has that status changed?

It doesn't say closed to new investors.

https://investor.vanguard.com/mutual-funds/profile/VWELX