Target Date Funds and Selling Before Year End

[almost_there]

I recently retired (end of 2019). I have as a core holding Vanguard Target Retirement 2020 Fund (VTWNX). This represents about 30% of my (approx 1.7M) portfolio. Most of the portfolio is tax deferred (Vanguard and Fidelity traditional IRAs). This fund has basically been on autopilot. It pays dividends at the end of the year. So far I have always just re-invested the end of year dividends. Target date funds seemed to make sense to me during my working life. I am curious as to thoughts on if it makes sense to hang on to them after retirement? Also if selling does it make sense to wait till year end after the dividends are paid?

 

[mrfeh]

Ignore the year stamped on the fund. The only thing that's relevant is the asset allocation and whether or not it makes sense in your portfolio.

There's no implicit reason to sell such a fund just because you're no longer working.

That being said, such funds merely add a layer of fees to your investment costs. I suggest owning the underlying funds directly: https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

 

[COcheesehead]

There is a difference in target date funds. Some are TO the date and some are THROUGH the date.
A TO the date fund has a static allocation after the target year is reached.
A THROUGH the date fund continues to adjust.

Make sure you understand which one you have.

Also regarding dividends, they are already cooked into the NAV throughout the year. The dividend declaration is a taxation event. It doesn’t add anymore value to your holding. So you can sell at any time and you’re not really give up anything.

 

[AmigaDude]

Although I don't use the Vanguard fund, I am in a similar Target Date fund. My suggestion is to stay with it, unless and until you learn more about what you want to do differently, and why.


Your fund is currently about 50% stocks, and 50% bonds, and they handle the investment changes for you. The expense ratio is a low 0.13%, according to them.


Once you learn more, you may decide to understand the bogleheads recommendations and make some changes.

 

[VanWinkle]

There is a difference in target date funds. Some are TO the date and some are THROUGH the date.
A TO the date fund has a static allocation after the target year is reached.
A THROUGH the date fund continues to adjust.

Make sure you understand which one you have.

Also regarding dividends, they are already cooked into the NAV throughout the year. The dividend declaration is a taxation event. It doesn’t add anymore value to your holding. So you can sell at any time and you’re not really give up anything.

I believe Vanguard funds continue to adjust until reaching Target Retirement fund with a conservative allocation,

 

[COcheesehead]

I believe Vanguard funds continue to adjust until reaching Target Retirement fund with a conservative allocation,

They all adjust up to the target year, but some then continue to adjust while others stay static. There’s a difference between the two and you should be aware of what you have.

 

[OldShooter]

... I am curious as to thoughts on if it makes sense to hang on to them after retirement? ...

In general, the feeling of invest-and-forget-about-it that comes with blended funds can be dangerous. For example, https://www.reuters.com/article/us-...ers-on-risky-path-to-retirement-idUSKBN1GH1SI

Personally I don't like blended funds because it is impossible to know what the performance of the equity tranche is when it is mixed in with the return from the fixed income side.

But ... VTWNX moots both those concerns because the equity side is 60/40 US and International total market funds. As long as you are happy with that home country tilt (I would be) I don't see any intrinsic reason not to hold it.

But (again) ... tax considerations and VTWNX's fit in your total portfolio may affect your decision.