What do you thing of Retitement Target Funds

[nun]

There seem to be an infinite number of portfolios and in preparation for ER I'm trying to simplify my accounts. I like the idea of having a 3 year cash reserve in a MM, but I'm considering putting the rest of my after and before tax money in a Target Retirement Fund.

What do you think of these funds? Would this be a fairly easy way to simplify my financial life?

 

[yakers]

I like them, my biggest fund is a target retirement type fund. You can add other funds or stocks to cover assets tha may not be in a TR fund, like REIts or emerging markets. But as a core fund or even an only fund I think they make sense.

 

[yakers]

What Will Effect Of Repeal Of Rule 10A-1?

OK

 

[unclemick]

Jan 2006 Sold my big dog - Lifestrategy moderate and the little puppies - VG REIT Index, Small Cap Value Index and Corp Hi-Yield while purchasing - a little drum roll please:

Vanguard Target Retirement 2015.

Toss in a little early SS and a small non cola pension - and badda bing, badda boom:

My 14th year of ER is go at throttle up!

heh heh heh - thus completing my grand theory of Chickenheartedness. Vanguards computers rebalance and slide those assets whether I look, get/don't get emotional, do something stupid like think or whatever.

Meanwhile off to the side - in the land of the putz there are a few individual stocks, hormones, emotions, kayaks and other silly stuff for guys like me who refuse to grow up.

 

[LOL!]

They are great if you have all your assets in tax-advantaged accounts. They are not great if you have a taxable account and do not need to withdraw money from it. The reason is that the bond dividends will be taxed as ordinary income if held in a taxable account. And target retirement funds have bonds plus equities in the same fund. I think it would be better to split that up more efficiently if one has taxable and tax-advantaged accounts.

 

[chinaco]

I like the target fund idea. I am currently using a slice and dice approach with separate mutual fund indexes. I believe it provides a little more flexibility.

I am intending to manage our money for retirement in allocations for 4 decades. I am going to use the target funds for funding later decades of retirement. Since it would put the rebalancing on auto pilot for me.


I could slice and dice it for our entire retirement. But If something happened to me, DW would not know what to do... So I have decided the target funds are a nice way to solve that problem later in life.

 

[W2R]

There seem to be an infinite number of portfolios and in preparation for ER I'm trying to simplify my accounts. I like the idea of having a 3 year cash reserve in a MM, but I'm considering putting the rest of my after and before tax money in a Target Retirement Fund.

What do you think of these funds? Would this be a fairly easy way to simplify my financial life?

It would. Personally I don't have any of these funds simply because I would rather do my asset allocation myself.

 

[mickeyd]

I like the idea a lot.

I enjoy tinkering with my stash and I even enjoy the rebalancing process every year or so, but unless I catch the Alzheimer's bug, I probably will not be jointing the TR crowd.

DW, OTOH, has instructions from me to rollover all of my tax-deferred account into a TR or Life Strategy fund if I predecease her or catch that A-bug. She does not see the joy that I get in having a fund with an ER of .09%!

 

[bssc]

I have stayed away from the target funds in my MegaCorp's 401(k). They have large annual fees. Instead, I went with their S&P500 Index fund.

 

[Tiger]

My answer is exactly the same as mickeyd's.

 

[Goonie]

I like the Target funds. I use them for some of my tax-deferred stash. My RothIRA is a Target 2020, and I just set up a Rollover IRA with a Target 2030 for some money I'm getting refunded from my pension plan (the refund is what was paid in for surviving spouse pension plus interest.....I have no spouse, therefore the refund).

Vanguards computers rebalance and slide those assets whether I look, get/don't get emotional, do something stupid like think or whatever.

Like unclemick says, they do the rebalancing so I don't have to pay too close of attention to it. I can take care of other matters instead.

 

[mathjak107]

as i stated before they work better when you plunk down all the money all at once rather than use them as a fund you dollar cost average in to over time.

when you buy in over time the combination of them shifting allocations away from stock over time coupled with the fact that the markets are up 2/3 of the the time and down only 1/3 and your buying in higher and higher usually leave you more conservative than you probley wanted to be.

 

[Animorph]

I'd prefer more foreign stocks and less bonds than most TR funds, though I could buy one with a much later target date to fix the bond problem. Maybe a target year 10-15 years after I retire (which will hopefully be around age 53, so maybe that is completely normal if they think I'm 65 in the target year).

The thing I don't like is giving up the ability to draw only from the bond side in the years when stocks are down (during retirement). I see quite a few other people thinking they've got 3-7 years worth of bonds to carry them through bear markets. I like that idea, but you can't do it with a TR fund.

So I'd prefer separate stock and bond funds. That said, my DW also has instructions to move to a TR fund for simplicity, if she wants. I'm slice and dice right now.

Dan

 

[yakers]

The thing I don't like is giving up the ability to draw only from the bond side in the years when stocks are down (during retirement).
Dan

I have not seen any definitive studies on the impact of withdrawing from two funds stocks/bonds Vs withdrawing from a TR fund which constantly rebalances. It makes sense that the two fund would be better but it is not clear what the ideal rebalance structure is; every year, 18 months, 5 change from AA, and what about changing AA over time. I would like to know more to determine if it is really better than a TR fund which would be more 'idiot proof' . And another way to do that is have a larger cash stash and don't draw from the TR at all under certain circumstances. And taxes complicate things is the bonds are tax free/deferred and the stock taxable. Mine are tax deferred for the TR fund. A small amount of DRIPs available to sell if needed.

 

[mathjak107]

target funds work best when they are your only funds. otherwise again you tilt the asset allocations in to different weightings then the fund feels is optimal and thats why you bought it in the first place

 

[Rich_by_the_Bay]

I like target funds for the accumulation phase, with the caveats mentioned by others. The recent study in the Journal of Financial Planning (sorry don't have the reference handy, but last couple of months) and other testing by Lucia suggest that in the payout phase, there may be some advantage to selling bonds and cash first, and hold stocks longer.

If you believe that, when you approach retirement you may wish to divest yourself from the target fund and start separating your asset classes so you can design your payouts as you feel best.

I recommended target funds for my 30-something kids.

 

[ats5g]

Here's a link to Vanguard's TR funds, and along those same lines Vanguard's LS funds. And, of course, a comparison b/w the two.

Note that Vanguard's TR funds hold little cash/ST bonds [only 5% for TR income], where the conservative LS funds hold 20 + 25% St bonds. Also, the TR funds use a good slug of TIPS along with nominal bonds, while the LS funds only use nominal bonds.

If I didn't really want to manage my investments, and they were all tax deferred, then I'd probably go with one of Vanguard's balanced, LS, or TR funds. Neither of them will totally blow up your retirement.

- Alec

 

[Tadpole]

I have some Vanguard target funds from a rollover I did. But it is less than 4% of my holdings. I think that the target funds are too conservative but are good for people who, otherwise, might just dump their money in only one non-diversified regular fund. I would just advise people to choose a target fund targeted for the year they will be 70 or 75 at least.

 

[unclemick]

70.5 for my Target Retirement 2015 - cause I'm young at heart and the IRS wants their RMD cut. Before I was allowed to croak at precisely 84.3 (circa 1992 values). Now on the newer tables with the passage of time and mordern medicine it's 84.6 give or take - AND they are not as greedy on RMD as 1992.

Yeah!

heh heh heh - .

 

[TuckerKatt]

I have some Vanguard target funds from a rollover I did. But it is less than 4% of my holdings. I think that the target funds are too conservative but are good for people who, otherwise, might just dump their money in only one non-diversified regular fund. I would just advise people to choose a target fund targeted for the year they will be 70 or 75 at least.

Why 70/75?

 

[Tadpole]

Why 70/75?

As I said, in my opinion, most target funds are too conservative. I advised this based on my opinion. It keeps the fund more aggressive longer to choose one that is for someone ten or fifteen years younger than oneself. If you like the way they adjust based on your actual age, then choose one that is matched to your age. I would not choose to do that, myself.

 

[Goonie]

As I said, in my opinion, most target funds are too conservative. I advised this based on my opinion. It keeps the fund more aggressive longer to choose one that is for someone ten or fifteen years younger than oneself. If you like the way they adjust based on your actual age, then choose one that is matched to your age. I would not choose to do that, myself.

That's similar to what I did. I have one (Roth IRA is a target 2020) that's aimed at age 63, and another (Rollover IRA is a target 2030) that aims at age 73. The 2020 is about 77% stock, while the 2030 is about 87% stock. All things considered, I'm quite comfortable with those percentages.

 

[FinanceDude]

As I said, in my opinion, most target funds are too conservative. I advised this based on my opinion. It keeps the fund more aggressive longer to choose one that is for someone ten or fifteen years younger than oneself. If you like the way they adjust based on your actual age, then choose one that is matched to your age. I would not choose to do that, myself.

I agree with you 100%. However, think of HOW MANY folks would have been "financially saved" had they put their money in these (if available) before the bear market of 2000-2002........

 

[ats5g]

I agree with you 100%. However, think of HOW MANY folks would have been "financially saved" had they put their money in these (if available) before the bear market of 2000-2002........

More than would have been "financially saved" by their broker. O0

btw - most of the TR funds weren't created until end of 02 beginning of '03 [except for a couple from Fidelity].

 

[FinanceDude]

More than would have been "financially saved" by their broker. O0

I guess you were always the "funny kid", right??