My Vanguard Financial Plan Results

[km4hr]

Hello Friends,

Just recieved results of my comprehensive financial plan from Vanguard. I'm 53 and considering retiring soon. I'd appreciate any comments.

Vanguard proposed two plans. The first included a variety of funds, all Vanguard of course. The second, and recommended, plan was the following. I like the simplicity of it.

Vanguard Life Strategy Conservative Growth: %80
Vanguard Total Stock Market Index: %20

Should I invest my entire nest egg with Vanguard?
Any experience/opinions on Vanguards planning services?
Any better plans out there?

thanks
David

 

[yakers]

Well, if you like simple then the VG plan is a good one. My wife will be retiring soon and I expect she will put her 403b funds into VG Target Retirement 2020. How many funds is up to you. Some people prefer to add flavor of market segments. Then you have to decide when to rebalance. Its really up to you but VG is my favorite but not the only good company out there and simple is OK by me.
But there are other ways just more based on your temperment than anything else.

 

[LOL!]

Sorry, that's not a financial plan ... that's just an asset allocation.

Lots of questions in order to make intelligent comments on the plan.
Is it accumulation phase? Will you start withdrawals soon? Married? Does spouse work? At least a couple dozen more questions?

Although we don't invest our entire nest egg with Vanguard, I would feel comfortable doing that.

 

[TromboneAl]

I think having everything with VG would be a good idea.

 

[MasterBlaster]

My comment is that this portfolio has lots of bonds and little foreign stock exposure.

So from an asset allocation standpoint, I would want a somewhat different mix.

 

[cute fuzzy bunny]

Aye, thats an asset allocation. But I'll quibble with it for what it is.

I'm not sure why I'd go with the Conservative lifestrategy allocation and then spice it up with more stocks on the side when I could buy the Growth lifestrategy and get almost the same thing, autobalanced, at about the same cost.

Or go with the targer retirement 2025 and get nearly the same allocation that auto adjusts away from stocks and towards income producing bonds automatically as you age, again at about the same cost.

Sort of odd...

 

[justin]

Aye, thats an asset allocation. But I'll quibble with it for what it is.

I'm not sure why I'd go with the Conservative lifestrategy allocation and then spice it up with more stocks on the side when I could buy the Growth lifestrategy and get almost the same thing, autobalanced, at about the same cost.

I think the LifeStrategy Moderate Growth Fund (VSMGX) would get you closer to the stock/bond mix that VG is proposing.

The international allocation is a little low. Not sure if it's worth adding an extra fund to add more international (Total international maybe?). I think the target retirement series of funds have a little higher international allocation.

But the VG doesn't seem to bad. Simple is good.

 

[unclemick]

Hmmm - at age 62/63 this year - 12 years into distribution phase.

Vanguard Target Retirement 2015(trad IRA)
Vanguard Lifestrategy mod (Roth) - to be untouched until age 84.3 - in case I don't croak on time
Vanguard Broker Account - only 36 more DRIP Plans to kill.

ORP calc hints perhaps selling taxible first but I need something to stir the blood when it's a bad day to kayak. Besides I like the Norwegian widow - been on her side since 1989.

One fund is all it takes. The rest is hormones and biologically driven - hence probably incurible.

If you catch the 'slice and dice' bug - then there is a vast world of choices out there.

More than one way to skin a cat.

Notice I didn't even mention real estate - another broad area with a range of choices.

Heh heh heh heh - once timberland(from 1969) now a vacation development LLC complete with those skinking Spotted Owls should be winding up in the next five years or so.

Vanguard is good. The real question is - who are who ala POGO.

You can do it with one fund - or venture into slice and dice.

Only you can answer that one.

Heh heh heh heh - the older I get - the more simple I like it. Now when I was young in the accumulation phase - I made every invesment(mistake??) in the book - except perhaps commodities contracts. I even played with warrents in the 70's - anyone remember them?

P.S. Tongue in cheek wise - I don't need no stinking financial plan! I know what div/interest is - to paraphrase the great Yogi Berra - that's real money.

 

[unclemick]

P.S. ??

Is the TSM is case you live a long long time - ie are they looking at a 30+ year span time and what'ya got? - Roth. Trad IRA and or Taxible? Take out sequence assumptions are important.

 

[km4hr]

Sorry, that's not a financial plan ... that's just an asset allocation.

Lots of questions in order to make intelligent comments on the plan.
Is it accumulation phase? Will you start withdrawals soon? Married? Does spouse work? At least a couple dozen more questions?

Although we don't invest our entire nest egg with Vanguard, I would feel comfortable doing that.

You're right, I didn't provide a lot of info. There is much more to Vanguard's "plan" than I provided. I didn't want to bore anybody! I mostly wanted to know if putting all eggs in one basket is considered a safe thing to do. Right now I have stuff stashed in four financial institutions. The responses so far seem to indicate that most people reading this blog would have no problem putting everything with Vanguard.

But to address the questions you asked; I'm 53 and looking to retire at 55 so accumulation phase is about over. Never married. House is paid for. No other debt. Will have small pension.

I've talked to other financial institutions such as AG Edwards and Wachovia. They provide comprehensive plans but they seem complicated and pricey. I'm amazed at all the financial planning resources being offered today. Seems like the number of financial planning commercials are second only to the number of drug commercials. If it weren't for those two I think commercial TV would have to go out of business.

I appreciate all the responses. I think I agree with whoever said the Vanguard plan doesn't have enough foreign exposure. I'm also question the need for investing in bonds right now. That advice seems to be based on a historical situation that doesn't currently exist. With rates at historic lows and the flat yield curve it seems bonds are almost guaranteed to lose, or at least not make much progress in a positive direction. But what do I know?

Anyway, enough of my drivel. Thanks for you attention and considered responses.

David

 

[justin]

If you want to get fancy with your investing at VG, you could "borrow" my portfolio I set up for the passive component of my company's pension-esque plan. It has a whopping 3 funds.

40% total US market
30% total international
30% short term bonds

Depending on your risk tolerance, up the bond allocation some. I think VG had you at 60/40% stock/bond. Too much international? Lower that allocation a little in favor of total US market.

Maybe:
40% Total US mkt
20% Total Int'l
40% short term bonds

But I would have no problem with all my money at VG. The reason AG Edwards and Wachovia seem expensive is that they are. They'll probably have you paying 2-3% more in fees and expenses than you really should. That means your share of your portfolio's earnings will be significantly reduced.

 

[BigMoneyJim]

David, I've also asked before about having everything with one institution, but with one or two exceptions nobody seems the least bit bothered--if the institution is Vanguard, anyway. All my money is with Vanguard.

I think one or two funds is fine. I view the LifeStrategy series, Target Retirement series, Wellington and Wellesley as the same basic idea tweaked for different allocations, and in the case of Target Retirement 20xx the allocation shifts over time.

My basic plan is LifeStrategy Moderate Growth with some other index funds added to increase REIT and international stock exposure (or anything else I decide to get into...commodities are oft-discussed here now, but I'm not personally ready for a commodity fund yet). My actual fund allocation is slightly more complicated due to choice restrictions in my 401(k), but I won't bore you with that.

FWIW I'm 35, accumulating and roughly 15 years from a full traditional ER if I continue that route. I'm stuffing new money to fit my mix regardless of whether people think a particular asset class is overvalued at the time.

EDIT: I neglected to mention I also have a small/mid cap index fund (based on Wilshire 4500 I think). Just some more seasining to my base of LS Moderate Growth.

 

[Texas Proud]

David,

As other have said, it is not a problem to have all your money at one 'institution'. I could be almost any of them, but VG is cheaper.. however, Fidelity or T Rowe etc is fine also... this is not having all your eggs in one basket... it is not like a bank where your money is being used for loans etc and you can lose because the institution has a problem... you are safe from company exposure..

BUT, having all your money in one basket or one fund IS a problem... now, I am not saying some of the life strategy etc funds are one fund as they invest in many of the 'real' funds. Just read their prospectus of which fund and what percent they use, but it is NOT one fund... you do need diversification and the total stock, international, bond is a good way to go if you do not want to deal with the funds that much...

 

[km4hr]

Thanks Texas and Others,

I guess I'm just a little paranoid that Mr. Bogle might pass on and take my meager funds with him. I've always thought diversification in where you invest might somehow be important like what you invest in. I'd panic if I called VG on the phone or logged in to the web site and nobody was home. At least during the panic of 1929(?) people had a local bank to go stand in front of.

David

 

[brewer12345]

Thanks Texas and Others,

I guess I'm just a little paranoid that Mr. Bogle might pass on and take my meager funds with him. I've always thought diversification in where you invest might somehow be important like what you invest in. I'd panic if I called VG on the phone or logged in to the web site and nobody was home.  At least during the panic of 1929(?) people had a local bank to go stand in front of.

David

VG is special among brokers in that the mutual fund shareholders actually own the company, similar to a mutual bank or insurer. This removes some conflicts of interest and incentives to do stupid, aggressive stuff. In any case, VG has so much in customer assets that the Fed would never let them collapse. People were worried about Refco going poof - tempest in a teapot compared to the global economic havoc if any major broker were allowed to fail.

 

[cute fuzzy bunny]

Besides, dont you actually own the underlying assets in mutual funds such that if one went belly up you still get your investments out of it...somehow...with presumably some level of loss...or is this one of those things that is spot on in theory but in actuality wouldnt work out too well?

 

[SteveR]

My current 401k is with VG and my allocation is close to Justin's but I also have mid caps in the mix too. I plan on rolling over into a VG IRA when the time comes and stick it and forget it for a few years as I don't plan on touching it until I have to at 70.5. I plan on rolling over my DW's 401k into VG too. I need to consolidate some more.

 

[brewer12345]

Besides, dont you actually own the underlying assets in mutual funds such that if one went belly up you still get your investments out of it...somehow...with presumably some level of loss...or is this one of those things that is spot on in theory but in actuality wouldnt work out too well?

I think the latter. Ask some of Refco's clients how quckly they were able to access their accounts after the implosion.

Generally speaking, when a regulator or BK court steps in, throw all the rules out the window.

 

[template]

..The responses so far seem to indicate that most people reading this blog would have no problem putting everything with Vanguard....

Guess I'm in the minority, but wouldn't put all my money with any single company. I'm pleased with my Vanguard funds, though.

 

[ats5g]

Simply put, the funds Vanguard offers are separate companies from The Vanguard Group, Inc. Each fund is owned by the investors that own shares of the fund [i.e. you and me]. The Vanguard Group, Inc is owned collectively by all of the vanguard funds [wellington, wellesley, 500 index, etc.]. Hence, Vanguard is owned by all of us, not Bogle, Brennan or anyone else.

The Vanguard Group, Inc provides services to the funds [at cost] pursuant to a Service Agreement. If the fund, or whoever votes in voting matters [probably the funds' trustees with Vanguard funds], decides that Vanguard is not longer the best administrator of that fund, that fund can find someone else to administer the fund. Of course, IIRC John Brennan is the Chairman of each of Vanguard's funds, so the likelihood of this happening is nil.

Also, each fund has a custodian [like JP Morgan Chase for Wellington] that is responsible for maintaining the Fund’s assets, keeping all necessary accounts and records of Fund assets, and appointing any foreign sub-custodians or foreign securities depositories. So, The Vanguard Group, Inc. does not hold any of the assets, and IIRC each funds' assets are separate from the assets of The Vanguard Group, Inc.

I would no problem holding all of my investments with Vanguard. Except for the TSP, we have all of our investments with Vanguard.

- Alec