Accumulators (and others) using Target Retirement or other "life-cycle" funds
Hi all,
I'm a 36 yr old electrical engineer, my wife is 37 and stays at home with our two kids. We have amassed a decent amount in our Roth IRAs ($197k) and my 401k ($193k), about $390k total. We have a $140k mortgage (home value about $300k) and own a single-family rental property free and clear (value about $185k).
I'm starting to think about the possibility of retiring early. Our Roth IRAs and 401k are invested in 100% stock mutual funds, mostly Vanguard, 3/4 in index funds and 1/4 in actively managed funds.
I'm thinking about moving some (or all?) of our money to a life-cycle fund. I like the simplicity, low cost, automatic rebalancing and the professional management. I also want to get some exposure to bonds, at least 10%, to dampen volatility a little. Our Roths are at Vanguard so I have access to Target Retirement funds there, my 401k is with Fidelity so I can choose Fidelity Freedom funds If I want. I plan to continue contributing the max to our Roth IRAs (currently $8k) and probably the same amount to my 401k pre-tax. Don't really have much "taxable" investments to speak of (about $5k in a stock investment club).
What I'm having a hard time deciding is which TR fund to pick? If I was to work until the "normal" retirement age of 65 then I should pick Target Retirement 2035 since I will turn 65 in 2035. But say I wanted to shoot for retiring at age 55, should I instead choose Target Retirement 2025?
I guess it goes back to that question posed to those of us working to ER.....are you shooting for a certain date to retire, or are you shooting for a certain dollar amount (e.g. 25x expenses)? If a date, then you should just pick the Target Retirement fund corresponding to that date. But if a sum of $$$ is your goal, maybe it's smarter to stick it in your age 65 TR fund (my case TR 2035) to have more stock exposure for longer and thus have more chance of building up to the desired sum?
Anybody thought through this? What were your considerations when deciding?
Would also like to hear from people like "unclemick" that use TR funds.....what would you do if you were in my shoes (i.e. age 36, $390k to invest, DCA $16k/yr, dreams of ER at say age 55 after I get at least my oldest through college)?
Thanks.
Hi all,
I'm a 36 yr old electrical engineer, my wife is 37 and stays at home with our two kids. We have amassed a decent amount in our Roth IRAs ($197k) and my 401k ($193k), about $390k total. We have a $140k mortgage (home value about $300k) and own a single-family rental property free and clear (value about $185k).
I'm starting to think about the possibility of retiring early. Our Roth IRAs and 401k are invested in 100% stock mutual funds, mostly Vanguard, 3/4 in index funds and 1/4 in actively managed funds.
I'm thinking about moving some (or all?) of our money to a life-cycle fund. I like the simplicity, low cost, automatic rebalancing and the professional management. I also want to get some exposure to bonds, at least 10%, to dampen volatility a little. Our Roths are at Vanguard so I have access to Target Retirement funds there, my 401k is with Fidelity so I can choose Fidelity Freedom funds If I want. I plan to continue contributing the max to our Roth IRAs (currently $8k) and probably the same amount to my 401k pre-tax. Don't really have much "taxable" investments to speak of (about $5k in a stock investment club).
What I'm having a hard time deciding is which TR fund to pick? If I was to work until the "normal" retirement age of 65 then I should pick Target Retirement 2035 since I will turn 65 in 2035. But say I wanted to shoot for retiring at age 55, should I instead choose Target Retirement 2025?
I guess it goes back to that question posed to those of us working to ER.....are you shooting for a certain date to retire, or are you shooting for a certain dollar amount (e.g. 25x expenses)? If a date, then you should just pick the Target Retirement fund corresponding to that date. But if a sum of $$$ is your goal, maybe it's smarter to stick it in your age 65 TR fund (my case TR 2035) to have more stock exposure for longer and thus have more chance of building up to the desired sum?
Anybody thought through this? What were your considerations when deciding?
Would also like to hear from people like "unclemick" that use TR funds.....what would you do if you were in my shoes (i.e. age 36, $390k to invest, DCA $16k/yr, dreams of ER at say age 55 after I get at least my oldest through college)?
Thanks.