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Old 03-02-2016, 07:50 PM   #21
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I very much appreciate your advice, samclem, and the simple method you outlined for selling my HC over 9 months. I will start this month. You even made it simple enough for the math-challenged like me. I hope your formula will help others with a similar problem.

I also like the idea of the Target Date 2035 fund. I want something my daughter can handle after I am gone. If she invests in a single, balanced fund, we probably don't even need to complete the agent authorization for her account.

She really dislikes dealing with her investments and finds it both frustrating and very uninteresting. Unfortunately, she will have a reality check at some point when it sinks in that she will have no pension from her physical therapy job, and that her paychecks will eventually stop, and she will have to live on SS and her investments. I'm encouraging her to work longer, defer SS until she's 70, invest in low-cost Vanguard funds, and save, save, save.

Would you dollar cost average her money in over a number of months or lump sum it into Vanguard now?

Thanks to everybody for your willingness to help me with these questions. You perform a very valuable service to other investors.

Goldenmom
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Old 03-02-2016, 08:20 PM   #22
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Would you dollar cost average her money in over a number of months or lump sum it into Vanguard now?
That's a good question. Many people would prefer to DCA it in, and that does reduce the risk of jumping in just before a drop. But, overall, markets generally go up, so investing the money immediately is the method that increases the chances of the best outcome.

An article on the pros/cons of each approach. (link) From that article:
Quote:
Both lump-sum investing and DCA have their appropriate time and place. The research shows that lump-sum investing pays off about 66% of the time, which is a long way from all the time. . . . If you hit that bad 33% in lumpy style, you can lose a lot of money.
I would add that if you miss a runup in prices because you didn't lump-sum in, you'll also miss out.

At the end of 20 years, the difference is likely to be tiny. Since you asked what I'd do: I'd invest it all at once and then move on. I also wouldn't even look at the balance except maybe once per year--it serves no purpose to get excited about daily, monthly, or even annual downs or ups along a 20 year path.
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Old 03-02-2016, 11:10 PM   #23
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Probably, but don't know how else to tell when Health Care is having a good or bad day.

I check the share of ibb index.


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Old 03-03-2016, 06:30 AM   #24
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Probably, but don't know how else to tell when Health Care is having a good or bad day.
I recommend that you don't bother to find out if it's having a "good day" or a "bad day." If you sell during a "good day" the stock might just as easily move up the >next< day, too, and then you still would have sold "too soon," right? And the stocks you >could< have bought with the Health Care proceeds will also be potentially having "good days" while you are trying to time the sale of Health Care. Just sell it off in a mechanical fashion and disregard the price. Over 8 or 12 sell dates, odds are good things will even out.

Fixating on share price movements is an angst-inducing and potentially very expensive hobby with zero benefit to your investments. I know you have better things to do with your time.
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Old 03-03-2016, 09:17 AM   #25
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Hey Samclem,
I will approach the HC "sells" in a mechanical fashion as you suggest.

I went to my Vanguard account and selected "Exchange" and "Sell by Shares" to find my total HC shares per account and they are as follows:

My IRA:
215

Husband's IRA
1830

Husband's Solo 401(k)
111

On the arbitrary sell date each month, I divide each of the 3 share totals (215, 1830, and 111) by 9 and sell that many shares.

For example, 215 shares divided by 9 = 23 shares. Each month I will sell 23 shares of HC from my IRA. I repeat the process on the same day each month with the other 2 accounts. Is this correct?

What are your thoughts regarding dollar cost averaging vs. lump sum investing our daughter's money into her balanced account?

Thanks again to you and all who took the time to reply. This is a wonderful forum with such helpful members!
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Old 03-03-2016, 09:33 AM   #26
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For example, 215 shares divided by 9 = 23 shares. Each month I will sell 23 shares of HC from my IRA. I repeat the process on the same day each month with the other 2 accounts. Is this correct?
Yes, that's the right math for the first month. After that, don't do any more division, just sell the same number of shares (e.g. 23 in the case of your IRA, 204 from your husband's IRA, and 13 from your husband's solo 401K) each month. There will be a slightly different number of shares left in the account on the 9th month, just sell them all.

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What are your thoughts regarding dollar cost averaging vs. lump sum investing our daughter's money into her balanced account?
I wouldn't DCA, I'd just buy it all at once. See post #22 for the reasons.
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Old 03-04-2016, 05:56 AM   #27
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Logged onto our daughter's Vanguard account to look up Target Date 2035 fund and found this alert. What does this mean? Still too early to call them.

American Funds 2035 Target Date Retirement Fund® Class R-6 (RFFTX)

This fund is not available for purchase or transfer
This fund is not available for purchase and cannot be transferred to your Vanguard Brokerage Services® account from another financial institution. Contact Vanguard Brokerage Services at 800-992-8327 for more information.
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Old 03-04-2016, 06:03 AM   #28
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Logged onto our daughter's Vanguard account to look up Target Date 2035 fund and found this alert. What does this mean? Still too early to call them.

American Funds 2035 Target Date Retirement Fund® Class R-6 (RFFTX)
This fund is not available for purchase or transfer
This fund is not available for purchase and cannot be transferred to your Vanguard Brokerage Services® account from another financial institution. Contact Vanguard Brokerage Services at 800-992-8327 for more information.
Is she trying to transfer current holdings into Vanguard from another custodian? Sounds like Vanguard is saying these can't be transferred into a Vanguard account. If that's the case then she might need to sell the fund in the original account, THEN transfer the cash to Vanguard and use the proceeds to buy the Vanguard Target 2035 fund (VTTHX) when the cash is available for investing.
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Old 03-04-2016, 06:42 AM   #29
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She has about 67K in cash at Vanguard in Prime MM. These funds arrived about a week ago and are from the liquidation of her Ameriprise variable annuity. It is completely liquid and ready to invest.

Interestingly, I logged into my own account and also got this same alert. What's up with this fund? Do they ever close a target date fund?

I will call Vanguard after they open.
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Old 03-04-2016, 07:08 AM   #30
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Goldenmom,
I think you are trying to buy the wrong fund.

You do NOT want to buy American Funds 2035 Target Date Retirement Fund (RFFTX) for your daughter. The American Funds RFFTX is not a Vanguard fund, is a fund from an entirely different company. Vanguard allows their customers to buy funds from other companies in their Vanguard accounts, but there can be fees. Regardless, it's NOT the fund you want to buy. The prospectus lists an expense ratio of .47% .

You want to buy the Vanguard Target Date 2035 fund (VTTHX). Its prospectus lists an expense ratio of .15%. If both funds charge the fees in their prospectus, the Vanguard fund (VTTHX) will cost your daughter about $200 less in fees every year than the American Funds product (RFFTX). And, the Vanguard Fund has other advantages over the American Funds 2035 Target Date Fund (RFFTX)

Use the ticker symbol VTTHX to look up the right fund.

It's a good thing that you got that error message.


Edited to correct VGD ticker symbol to VTTHX
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Old 03-04-2016, 07:49 AM   #31
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Gotcha! Thanks, samclem.

I put Vanguard Target Date 2035 fund (VTTHX) into the VG search window this time and didn't get the error message. I printed the page just in case. Our daughter may be ready to make this purchase today, but she is also driving down Sat. morning to complete the agent authorization, so we may do it tomorrow. I will text her and see if she wants to put in the buy today. I think we are all set now and I don't need to call Vanguard after all thanks to you. Thanks so much!
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Old 03-04-2016, 08:55 AM   #32
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She really dislikes dealing with her investments and finds it both frustrating and very uninteresting. Unfortunately, she will have a reality check at some point when it sinks in that she will have no pension from her physical therapy job, and that her paychecks will eventually stop, and she will have to live on SS and her investments. I'm encouraging her to work longer, defer SS until she's 70, invest in low-cost Vanguard funds, and save, save, save.
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Our daughter may be ready to make this purchase today, but she is also driving down Sat. morning to complete the agent authorization, so we may do it tomorrow. I will text her and see if she wants to put in the buy today.
If you want her to thank you a LOT in 20 years, convince her to set up an automatic monthly transfer into this account. If she doesn't have to think about it and she never gets a chance to spend the money, it can be a relatively painless for her and require no further action. It can really add up.
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Old 03-04-2016, 09:00 AM   #33
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Our daughter's order has been submitted. She put all of her funds in a lump sum into Vanguard Target Retirement 2035 Fund (VTTHX). Thanks for your guidance with her investment and thanks for preventing me from buying the wrong fund! I texted her that she is now a Vanguard indexer.
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Old 03-04-2016, 01:06 PM   #34
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Do they ever close a target date fund?
Yes and no.

In reality, most fund families have an "income" target date fund, which basically means "target NOW". They have conservative asset allocations, perhaps 25-35% equities, with mostly bonds and some cash equivalents.

When the target date is reached, fund families usually liquidate the specific target date fund and transfer the proceeds into the target "income" fund. For example, in 2020 Vanguard would likely close the "Target 2020" fund, since by that time its allocation would be basically the same as the Income fund anyway, and move the proceeds to the target Income fund.

In the case of a 2035 target date fund, there may be something like a 70-75% equity position, gradually reducing over time to maybe 25-30% equities, at which time it would be 2035 -- and the "target" becomes current income with just enough equity exposure to (hopefully) manage inflation and withdrawals.
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Old 03-04-2016, 01:45 PM   #35
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When the target date is reached, fund families usually liquidate the specific target date fund and transfer the proceeds into the target "income" fund. For example, in 2020 Vanguard would likely close the "Target 2020" fund, since by that time its allocation would be basically the same as the Income fund anyway, and move the proceeds to the target Income fund.

In the case of a 2035 target date fund, there may be something like a 70-75% equity position, gradually reducing over time to maybe 25-30% equities, at which time it would be 2035 -- and the "target" becomes current income with just enough equity exposure to (hopefully) manage inflation and withdrawals.
Not quite. From observation, most fund families' target date funds don't reach its most conservative level until a few years after the target date. For example, Vanguard's TR 2015 fund is roughly 50/50 at the moment and likely won't be merged into TR Income until 2021-2022. There are some cases where it takes up to 15 years after the target date before the fund merges with the income fund. It's important to at least be aware of the glidepath of the chosen target date fund else you might be in a riskier allocation than you're comfortable with. Mind, this may not be such a big issue for someone who never checks their balances as Vanguard's glidepath is pretty ideal for moderate allocation and imho, balances risk, return and investing horizon quite well).

Iirc, Vanguard TR 2035 should be around 80/20 right now.

Right now, I have everything in Vanguard TR 2040 but depending on when I reach critical portfolio mass, I might de-risk sooner. I'm planning on starting with 30/70 at start of retirement and following a rising equity glidepath.
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Old 03-04-2016, 06:20 PM   #36
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While I have you wonderful early retirement members assembled here, I'd like to ask another question about our daughter's investments.

She works as a physical therapist and her 401(k) at work is with Principal Financial Group. Her portfolio at Principal is confusing, but even I can tell that the fund expenses are high. They do offer an S&P 500 index fund but it only had a Morningstar rating of 3 stars. She'd like me to manage this account for her, but after looking at her portfolio and doing a little online research, I'm afraid this task is beyond my skill set. I am only familiar with Vanguard funds and am afraid she may need a fee-only fiduciary to help her find the best fund options. Do any of you know a forum or site that discusses how to design a low-cost index portfolio using Principal Group funds? I'm willing to educate myself if I can find some helpful resources. Vanguard says she cannot transfer her 401(k) while she is still contributing to it. Can any of you offer some advice for how I can help her? What would you do if she were your daughter? She has about 350K in her 401K. Has anyone seen a thread on Principal Group at any of the other forums? Thanks in advance.
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Old 03-04-2016, 08:40 PM   #37
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Principal Group offers these 3 index funds:
  • Large Cap S&P 500 Index - 0.31%
  • Mid-Cap S&P 400 Index - 0.31%
  • Small Cap S&P 600 Index - 0.31%
I tried to attach a pdf version of our daughter's current 401(k) holdings at Principal Group (see below). First attachment failed. See next post.



My husband and I wonder if she can rollover some of her Principal Group 401(k) to her Vanguard IRA while continuing to contribute to her Principal Group 401(k) at work.




I will also try to attach the funds available under her plan.


Thanks for comments and suggestions.
Attached Files
File Type: pdf CW's 401(k).pdf (135.1 KB, 29 views)
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Old 03-04-2016, 09:06 PM   #38
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Here's the attachment of our daughter's current holdings. I was able to open this one.
Attached Files
File Type: pdf CW's 401(k).pdf (135.1 KB, 22 views)
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Old 03-04-2016, 09:08 PM   #39
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Look closer at principal.com low cost funds. When you go in that direction you are in a deferred annuity, I think.

I'll have to log in later this weekend so I can find the exact language they use.
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Old 03-04-2016, 09:22 PM   #40
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Principal Group

Principal Group Funds Available Under Daughter's Plan

See attached pdf
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File Type: pdf Principal Group Funds Available Under Plan.pdf (196.4 KB, 15 views)
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