Fund Advice

[yakers]

I asked something like this a while back but time has passed and we are closing in having to make a decision. I am looking for a single fund recommendation, probably with Vanguard. My wife is scheduled to retire from teaching in June of this year. She is 58 and will RE by her fellow teachers standards. I have generally proposed she transfer her 403b into a Vanguard IRA when she retires, probably the Target Retirement 2025 Fund (VTTVX) which is about 58% stock. Due to the crazy structure of her teachers 403b we cannot transfer the entire amount until she is 59.5 without a “contingent deferred fee”. Since she could not withdraw from an IRA until 59.5 anyway and we do not need the money immediately (I am still working) this is just a small complication. I expect she will draw 4% or 5% a year of whatever is in the fund at 59.5.
As she will have a partially COLAd pension and I am still working and I will have a fully COLAd pension I do not think she needs a lot of bonds. We do not have a definitive AA but the general outline of our holdings are: we have Roth IRAs with VG the Asset Allocation Fund (VAAPX) we are pretty satisfied with it. We hold six individual DRIP stocks. Not part of our AA but almost as critical as our pensions, we own our home mortgage free which is about equal (at crazy California RE rates) to our financial holdings.

6% Roth IRA, Vanguard Asset Allocation VAAPX
29% 403B (Made up of 4 stock mutual funds which will end when transferred to VG)
48% Federal retirement TSP (401k type) in a Lifecycle type fund
8% 6 DRIP Stocks all mid or small caps
9% Cash


Two other funds we have looked at are the VG Star Fund is about 63% stock (VGSTX) and VG Lifestratedgy Growth about 65% stock (VASGX). Something like 50% total stock market, 25% international stock and 25% total bonds would be my idea of a perfect fund.

 

[Spanky]

Two other funds we have looked at are the VG Star Fund is about 63% stock (VGSTX) and VG Lifestratedgy Growth about 65% stock (VASGX). Something like 50% total stock market, 25% international stock and 25% total bonds would be my idea of a perfect fund.

If that's the allocation that you want, why restrict to only one fund? Buy the three funds. Below is a list of retirement funds, but none of them is close enough to your target.

Vanguard Target Retirement 2035 Fund
60.8% US
15.2% International

Vanguard Target Retirement 2025 Fund
46.3% US
11.7% International

Fidelity Freedom Funds 2015 Fund
50% US
8% International

T. Rowe Price RETIREMENT 2010 FUND
Domestic Stock 51.8%
Foreign Stock 13.1%

T. Rowe Price RETIREMENT 2015 FUND
Domestic Stock 55.3%
Foreign Stock 15.1%

 

[cute fuzzy bunny]

Pssst...wellesley...

Did I even look a little bit like unclemick when I said that?

 

[yakers]

Actually we just chose....Wellesley. I tend to like index funds but this had a nice risk reward profile for us. It may not make the top return but has very few negative years. Part of it is psychology. My wife can stand a little volatility, I told her we would have some correction around 2000, maybe 20% so she wasn't so happy when one fund lost 40%. But she likes how the funds have grown over time. But we are older, she is retiring and I do not want to have to explain big losses unless I can show her, hey-the market went down 30% and we "only" lost 10% or something like that.
When all the funds are transferred, which may take 18 months to avoid contingent deferred fees, we may go with a different fund selection/s. VG is offering my wife some advice on her AA which will be interesting to hear. I wonder how they will factor in COLAd pensions. But it will be "free advice". I have been very comfortable with fund selection over the last 10 years so they will have to propose a pretty compelling case to change anything.