Funds at Vanguard for rollover IRA

[MarieIG]

Hello All,

I am seeking help choosing funds at Vanguard for a rollover IRA. I will be rolling out my 401(k) from my job into Vanguard January 2nd. (Unfortunately, the fees do not make it worthwhile for me to keep it there. The administrative fees (which come in on top of the fund fees) are assessed against the account, so that the employer does not have to pay. Did a back-door Roth, and this is the final part of the story. I should be retiring in the first half of 2021.

I intend to do Roth conversions out of this account between 2021 - 2025. It is doubtful that I would take an straight withdrawals from the IRA (unless for some reason I wanted to pay taxes out of it, i.e. did not calculate my estimated properly, but that is not in the plan at the moment.) I will reassess what to do with what remains in the account in 2026.

I am looking to choose funds, and am looking for recommendations. These are the funds at which I am considering (although I really want the first two):


Vanguard Total (US) Stock Market - VTSAX (looking at 30%)

Vanguard Total International Stock - VTIAX (looking at 20 %)

Wellseley (about 1/3 bonds of approx 8.2 duration? - from memory so may not be accurate) (looking at 10 %)

Dividend Appreciation - VDAIX - looking at 5%

U.S Growth VWUSX - looking at 5%

International Growth VWIGX - looking at 5%

Vanguard Total Bond - VBTLX - (approx 6.7 duration) looking at 5%

Vanguard Total Interational Bond VTABX (approx 8.5 duration) looking at 5%

Healthcare (for fun/ too risky) VGHCX looking at 5%

Money market - looking at 5 -10 % (earning nada but gives a little flexibility)

I have bond fund concerns; although I don't believe that the Fed wants to raise interest rates for a while. Knowing me, I will be asleep at the wheel when they do so. (I tend to be slow to react in any event and look with horror at impending doom in total paralysis.)

Any thoughts are to whether I should get more bonds in Wellesley in place of pure bond funds (since they are doing the picking)? Or the very short term bonds (although is there much upside with them over the MM?).

Thank you.

 

[OldShooter]

Too complicated. VTSAX and VTIAX will do it on the equity. A bunch of very small/5% positions that duplicate holdings that are already in the total market funds is a bookkeeping exercise with little or no payoff. In fact your ratio of VTSAX and VTIAX is about the same ratio as the holdings of VTWAX, so you could even go to just one fund.

 

[MarieIG]

Too complicated. VTSAX and VTIAX will do it on the equity. A bunch of very small/5% positions that duplicate holdings that are already in the total market funds is a bookkeeping exercise with little or no payoff. In fact your ratio of VTSAX and VTIAX is about the same ratio as the holdings of VTWAX, so you could even go to just one fund.

Ok thanks OldShooter. They are low cost so that is a benefit . . . I will take a peek at WTWAX.

 

[OldShooter]

Ok thanks OldShooter. They are low cost so that is a benefit . . . I will take a peek at WTWAX.

Another thing you can do is to go to https://www.portfoliovisualizer.com/ and create two portfolios, one with the equity funds you have w. percentages adjusted to total 100% and one with just the two funds. Compare them over different periods and see if the difference is significant to you. PV uses historical data, so IMO it is good for comparing different approaches over long periods but it is not predictive and over short periods any of this is a crap shoot.

 

[MBAustin]

Agree that simpler is better. I went the more complicated route several years ago and still haven't undone it all. Hmmm...might be a good project for next week.

 

[MarieIG]

Another thing you can do is to go to https://www.portfoliovisualizer.com/ and create two portfolios, one with the equity funds you have w. percentages adjusted to total 100% and one with just the two funds. Compare them over different periods and see if the difference is significant to you. PV uses historical data, so IMO it is good for comparing different approaches over long periods but it is not predictive and over short periods any of this is a crap shoot.

That looks facinating. I will try it.

 

[MarieIG]

I should have hit the save button!

I ran it once (then erased my entries - sigh). The 60/40 vs. the five other funds 20% each, from 2000 - current, no rebalancing, got 9.43 v. 13.01.

 

[OldShooter]

I should have hit the save button!

I ran it once (then erased my entries - sigh). The 60/40 vs. the five other funds 20% each, from 2000 - current, no rebalancing, got 9.43 v. 13.01.

Sorry, I wasn't clear. Enter your current portfolio in the proportions you're holding. For example, if you're 80% equities and 30% of total portfolio is VTSAX, then enter 37.5% into PV(30 divided by 0.8), VTIAX at 25%, and so on. Try different 5-year periods, too.

In the comparison portfolio, VTSAX at 60% and VTIAX at 40%.

 

[MarieIG]

Sorry, I wasn't clear. Enter your current portfolio in the proportions you're holding. For example, if you're 80% equities and 30% of total portfolio is VTSAX, then enter 37.5% into PV(30 divided by 0.8), VTIAX at 25%, and so on. Try different 5-year periods, too.

In the comparison portfolio, VTSAX at 60% and VTIAX at 40%.

Thanks, I'll try. The rollover is coming over from my 401k which is John Handcock. Tiny little bits and pieces of bond and growth funds (about 5% total), about 30 percent income fund and the rest (approx 65% percent) in an S&P 500. (The S&P had the lowest fee - there were no total stock fund choices.) Plus there was a big, fat, administration fee plopped on top of it for some weath management company that my employer hired to do their book keeping. When I had asked them about in service conversations they did not know what I was talking about and when they finally figured it out - said that it would be a lot of work; when I asked them about scheduling monthly withdrawals upon retirement, appearantly an additional $95 per withdrawal would apply; and they kindly offered me an annuity with an approx 4.2 percent cost; not to mention a surrounder change. Nope, I'm not bitter.