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Vanguard Managed Payout Funds with RE Income?
Old 08-12-2014, 09:31 PM   #1
Recycles dryer sheets
Join Date: Sep 2007
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Vanguard Managed Payout Funds with RE Income?

Hi - it looks like we are on track for a June 2015 FIRE target and welcome any feedback you may have....husband will be 48 wife 46.

Our plan relies on getting partial support from the rental income from the 5 houses ( three free and clear and two with mortgages) we own which we figure will produce $4,000-5000 a month in net income as we'll $2,000 a month from an ($320,000 @ 7.5%) owner financing deal we arranged on the sale of a multi-family property last winter. We should also have approximately $500,000 in paper investments and $30,000-$50,000 in cash accounts (with rentals you sometimes need more cash).

The goal would be to make this last until husband reaches 60 (God willing) at which the 401ks, ($600,000 his, $400,000 her, IRAs ($50,000 each), husband's pension $25,000 per year and Social Security would begin to become available essentially every few years. Also if we get in a bind or get tired of land lording we can always sell one of the houses but for complicated tax reasons we need to wait five years too sell

One of the issues we are struggling with is what to with the paper investments. Currently we have $125,000 in VG Star, $45,000 in VG short term tax free bonds, $150,000 in cash (we were hoping to do another owner financing deal) and $140,000 on the way (cash). The rest will come from savings between now and then. We are thinking of most if not all of the 500,000 into VG Managed Payout over the next 12 months starting with the cash and ending the with Star funds. The thought being that it would give us another source of regular monthly income without tying up the money if for some reason we need it.

So what do think are we almost there? Is the putting the money into the VG managed payout a reasonable approach. Do you have an alternative.

I guess the one piece of info we have shared is the the 401 k fund are essentially 70/30 stock/bonds index funds with the largest bond allocation being TSP G fund bonds


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Old 08-15-2014, 01:53 PM   #2
Recycles dryer sheets
Join Date: Feb 2013
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I was intrigued by the payout funds (there were 3 of them until earlier this year) and was planning on using at least one of them. However, go to Bogleheads website and do a search and you will find very little good to say about the payout funds from these savvy investors.

The gist of it is the expense ratio is high and there is a lot of skepticism on the Market Neutral fund that makes up a portion of the payout fund. I think this view is shared by many in the marketplace as the now available fund, which is a consolidation of the previous three, really doesn't have much in assets considering how long Vanguard brought this concept to the market place.

In addition to seeing what the Bogleheads have to say about the payout fund find Taylor Larimore's thread on the 3 fund portfolio in the Personal Finance section. This is what I wound up doing and the only trick is determining what asset allocation you are comfortable with. If one does not like monitoring their funds then the recommendation is one of the Lifestyle Funds or one of the Retirement Funds where the rebalancing is done automatically for the investor.

Good luck on whatever you decide.
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