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What to do with rollover
Old 02-25-2014, 08:18 AM   #1
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What to do with rollover

I have approx. 12k in an old employer plan that I am going to be rolling over into a Vanguard IRA.
My wife has a IRA with her only holding being a Target retirement 2040 fund. I really like this fund for her and was thinking about just investing my 12k into a 2040 as well
My question is this... I have also been considering doing something a little different, not much, but a little different... I have been looking at the Vanguard- Tax Managed Cap Appreciation Fund, Admiral Shares.

I realize that the 2040 Target retirement and the Tax managed fund share a lot of similarities but all I have ever done is target retirement stuff. I am not sure what the "tax managed" part of this fund refers to and am just a little hesitant to pull the trigger on something other than a target retirement.

The tax managed fund beats the pants off of the TR2040 fund in the 1-3-5 year. Is there any reason not to go with the Tax managed fund?
Can anyone give me a little insight.

Thanks
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Old 02-25-2014, 08:48 AM   #2
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Tax managed funds don't belong in an IRA.
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Old 02-25-2014, 08:50 AM   #3
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Thanks Travel,
That was my concern. What makes something a tax managed fund? ... I would assume that a tax managed fund would belong in a Roth? Correct?
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Old 02-25-2014, 09:08 AM   #4
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Quote:
Originally Posted by nnkrealtor View Post
Thanks Travel,
That was my concern. What makes something a tax managed fund? ... I would assume that a tax managed fund would belong in a Roth? Correct?
A tax managed fund seeks to minimize taxes on investment returns. In an traditional IRA you pay taxes the same as on earned income. In a Roth IRA, you don't pay taxes on income at all.

So, a tax managed fund belongs in a taxable account, i.e. not a traditional IRA, not a Roth IRA.

You can't compare 1,3,5 years returns between funds with different risk levels.

I'd suggest reading a book or three from this list. I like the Boglehead's books, myself. Investment Books

You can often buy these books used really cheap here: BookFinder.com: Used Books, Out of Print Books, Textbooks, Rare Books, New Books
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