Anyone use Vanguard Managed Payout fund?

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Masquernom

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Wondering what opinions are on the Vanguard Managed Payout fund. Expenses are a little high, but sure looks like a nice automated way to monetize retirement savings.
 
Masquernom said:
Wondering what opinions are on the Vanguard Managed Payout fund. Expenses are a little high, but sure looks like a nice automated way to monetize retirement savings.
Click to expand...
I don't, but if I go first, DH has instructions to call Vanguard and move everything to this fund. And, if I feel like I'm seeing signs of my own cognitive impairment, that's where I'll be moving it. Heck, I may do it in a few years anyway. Fees are still better than 1% for typical management.
 
SumDay said:
I don't, but if I go first, DH has instructions to call Vanguard and move everything to this fund. And, if I feel like I'm seeing signs of my own cognitive impairment, that's where I'll be moving it. Heck, I may do it in a few years anyway. Fees are still better than 1% for typical management.
Click to expand...

I instructed my daughter that if I go first then, put everything in Vanguard Wellesley (since my wife doesn't care about financial stuff). Hmm, Vanguard Managed Payout could be another option.
 
neihn said:
I instructed my daughter that if I go first then, put everything in Vanguard Wellesley (since my wife doesn't care about financial stuff). Hmm, Vanguard Managed Payout could be another option.
Click to expand...

That's funny, because Wellesley had been my go- to for this purpose, until I saw someone on this board say they were using the Managed Payout Fund.
 
It says I can do better with lower fees by picking my own mix of funds. And in other news, TANSTAAFL.

I’d like to see some discussion of performance and/or issues with the fund.
 
Masquernom said:
Wondering what opinions are on the Vanguard Managed Payout fund. Expenses are a little high, but sure looks like a nice automated way to monetize retirement savings.
Click to expand...


I've had my Roth IRA 100% in it for many years. I like it. It gives me access to funds I'd never get to own otherwise. 401k is in a state managed endowment fund (same one used for the state pension). In taxable I am using Vanguard's High Div Yield index fund and will eventually add the Foreign stocks version.

My taxable account is using a dividend growth strategy and my 401k/Roth IRA are using "modern portfolio theory". I'm happy with this combination. I also have 17+ years in a state pension.

Age = 43, w2 income approx 73k, living expenses around $33k, investments worth around $1.1 million, early retirement date possibly at 45.
 
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I'm not impressed... a simple 55/45 (same AA as Managed Payout) or the beloved 60/40 AA with a 4% WR adjusted for inflation and rebalanced annually outperforms. If you look at the periods that the VPGDX outperforms and under performs they do seem to line up with good and bad years for international stocks.

https://www.portfoliovisualizer.com...cation3_3=40&total1=100&total2=100&total3=100

Same run with 20% of equity allocation being international for people who like some international equities in their portfolio:

https://www.portfoliovisualizer.com...cation4_3=12&total1=100&total2=100&total3=100

Same run vs a 50/50 mix of Wellesley and Wellington:

https://www.portfoliovisualizer.com...cation5_3=40&total1=100&total2=100&total3=100
 
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I know it's probably possible to get better returns, and you can get lower expenses with a mix of low cost index funds. But this seems like a good way to set up a monthly income stream with no effort. Can you set up the Vanguard S&P 500 index fund to send you a monthly check? I don't know.

I can see one issue with the fund. The original 4% rule research has you increasing your withdrawal by 3% each year for inflation. This fund will always stay at 4% distribution.

Is there a better way to set up investment to generate a monthly check? Hopefully nobody mentions annuities.....
 
Masquernom said:
I know it's probably possible to get better returns, and you can get lower expenses with a mix of low cost index funds. But this seems like a good way to set up a monthly income stream with no effort. Can you set up the Vanguard S&P 500 index fund to send you a monthly check? I don't know.

I can see one issue with the fund. The original 4% rule research has you increasing your withdrawal by 3% each year for inflation. This fund will always stay at 4% distribution.

Is there a better way to set up investment to generate a monthly check? Hopefully nobody mentions annuities.....
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Sure. In retirement, you probably want some fixed income, maybe an AA of 50/50 ~ 80/20? Put the Equity portion in a SPY or total market fund, that will pay ~ 2.x% annually, a Total Bond fund will pay ~ 3.x annually. The equity fund will pay quarterly, but it averages out.

Have the divs put into a MM (or just a cash balance int he brokerage account), set up that money market to transfer $X/month to your checking account each month. Adjust for the new year if you want/need.

It's easy to pretty accurately predict the income. If you need more than the divs provide, sell once a year (maybe 1%?), whichever (or both) to maintain your chosen AA.

And as you point out - if the managed pay-out fund doesn't increase the payments with inflation, you still may need to get in and jigger things. Any advantage just went "poof!". A once/year review is a small price to pay for lower expenses (OK, that's odd wording, but you know what I mean!).

-ERD50
 
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Masquernom said:
I know it's probably possible to get better returns, and you can get lower expenses with a mix of low cost index funds. But this seems like a good way to set up a monthly income stream with no effort. Can you set up the Vanguard S&P 500 index fund to send you a monthly check? I don't know.....
Click to expand...

Yes, it is very easy to set up an automatic redemption. We set one up for my BIL's mom. She had an underperforming deferred annuity. We split surrendering it across two years... December XXXX and January XX+1... to avoid any tax on the appreciation and then plunked the proceeds in Wellesley and set up an automatic redemption of $y,yyy/month from Wellesley to her local bank checking account.

In fact there was some confusion later when she went to apply for Medicaid LTC coverage in that his siblings thought it was an annuity.

I'm pretty sure that automatic redemptions can be set up for any Vanguard fund... and you can increase the amount for inflation each year with a few clicks to increase the amount.
 
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You can always set up a monthly dist. to your bank account w/ Vanguard, an electronic transfer.
 
I do that too but a bit differently... taxable account dividends and annual rebalancing of cash goes into online savings account paying 2.0%... then there is a monthly transfer from that online savings account to the local checking account that we use to pay bills... I call it my monthly 'paycheck".
 
You can setup auto transfer of funds from just about any account online to any other account. I do it monthly from my high interest rate savings account at one institution to my checking account at another institution. And same with any brokerage account (be it Vanguard or Fidelity or any of the others).
 
pb4uski said:
I'm not impressed... a simple 55/45 (same AA as Managed Payout) or the beloved 60/40 AA with a 4% WR adjusted for inflation and rebalanced annually outperforms. If you look at the periods that the VPGDX outperforms and under performs they do seem to line up with good and bad years for international stocks.

https://www.portfoliovisualizer.com...cation3_3=40&total1=100&total2=100&total3=100

Same run with 20% of equity allocation being international for people who like some international equities in their portfolio:

https://www.portfoliovisualizer.com...cation4_3=12&total1=100&total2=100&total3=100

Same run vs a 50/50 mix of Wellesley and Wellington:

https://www.portfoliovisualizer.com...cation5_3=40&total1=100&total2=100&total3=100
Click to expand...
Thanks for the link. Ran it with my 3 ETFs (SCHB/SCHF/PWZ) and turns out 60/10/30 is best and beats Managed Payout by a huge margin will slowly work towards that.

Ran 80/10/10 as well which surprisingly did NOT do as well [emoji55]
 
Thanks everyone! I didn't know you could set up Vanguard accounts for monthly distributions. When I start, I'll pursue that course of action. Sounds a lot better than the Managed Payout fund.
 
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