Vanguard Retirement Payout Funds

[cute fuzzy bunny]

Rich's approach isnt too far from what I'm doing at this point. Lots of 6.25% cd's, a lot of wellesley and a bit of high yield up front, with a lot of TSM, reits and SCV on the back end. When the first bucket gets low and rates reasonable, we'll start converting some of the long term equities into cash and bonds.

Keeps your long money long and your short money short.

Once I understand how they do distributions, these new funds might be contenders. Take a bucket of 3% return for 5 years worth, a bucket of 5% return for the next 15 and a bucket of 7% for the rest. Maybe just the 5% and 7%...i'm not that conservative.

 

[Rich_by_the_Bay]

Once I understand how they do distributions, these new funds might be contenders.

Exactly. If the distributions are just pro rata share sales after dividend reinvestment it may not be as interesting as if they distribute from cash only and rebalance opportunistically. FWIW, on their usual strategy synopsis Vg and other big fund families seem to be pretty opaque at that level of detail.

Let us know if you learn anything as this thing unfolds. I wish they had a fund with similar AA but stocks only. I'd use that for long term and do the bond/cash part myself.

 

[cute fuzzy bunny]

I'd be pretty surprised if they werent taking distributions that were already taxable and dispersing from those first. What happens after that is the good question.

Although these are supposed to be run by their quant group who also does the asset allocation fund, which values equities bonds and cash and adjusts to suit their relative valuations. So one could presume they'd sell off the overvalued stuff to meet distributions and then rebalance the rest also from overvalued classes. The fun part is that they'll be doing this monthly to make distributions...the 3% fund probably can get everything from dividends/interest, but the 5 and 7% funds will need to take some bites out of the portfolio every month to write "the paycheck".