Schwab Thomas Partners for retirement

[Smilinggirl]

I've had my IRAs in target funds at Vanguard for years. That seemed like the safest choice since I don't have a grasp on how or what to invest in on my own, but the returns are really small. I talked with one of the Vanguard advisors a year or so ago since I was thinking it would be worth paying someone to help me, but she actually sounded like she knew less than I do, which is really bad for someone in charge of other people's money.

I talked with someone from Fidelity last week, but he left me feeling confused and didn't seem too enthusiastic or patient with my questions. Also, the closest office is hours away, so it would essentially be all online as well and I'd probably still just go with target funds.

Today I met with an advisor at Schwab. He reviewed the robo advising (SIP), the managed portfolio and Thomas Partners (TPI). He indicated he thought TPI would be best for me. There's a .90 fee for dividend growth or .80 for a balanced income plan for less than 500k. I'm thinking that even after paying his fee, I'd still probably be better off since a real person would be managing my money, yet I'd still be able to monitor things on the web site and have input if/when I wanted it. He seemed pretty confident he can get me better returns that the target funds I've got now, which I believe.

I like that it's a real office near home with a real person I can talk with. He's owned the franchise for years and seems willing to be actively involved in managing my account. Additionally, he will give me a 700$ bonus for transferring the funds from Vanguard and he offers monthly classes on a variety of topics related to finances and retirement. I would probably also transfer most of my emergency fund from my bank since I could get a better rate with Schwab's money market, and he said he would help me set up a brokerage account and show me how to purchase individual stocks and monitor them as well. I'm really interested in that since I'd like to learn to be more active in decisions regarding my financial future and that seems like a good starting point. I'd even like to teach my grandkids eventually so they are encouraged to be active in their financial future early in life (unlike grandma).

Keeping in mind that I truly have very little understanding of how/what to do on my own, please tell me what you think. Are there any big red flags that I might not be seeing? Thank you for any input you can offer.

 

[pb4uski]

A .90 fee on each $100,000 is $900, so $4,500 on $500,000. And I suspect that you pay any fund or ETF expense fees on top of that. Seems like a waste of money to me.

What is the matter with the Vanguard balanced funds that you are in now?

2022 was a horrible year for most balanced funds as both stocks and bonds went down contrary to the conventional wisdom that when stocks zig that bonds zag.

What is this money for?

I have many accounts with Schwab by just manage them myself. You could set up an account at Schwab, get the benefit of a B&M office and someone that you can talk to but without the fee.

 

[Dash man]

I've had my IRAs in target funds at Vanguard for years. That seemed like the safest choice since I don't have a grasp on how or what to invest in on my own, but the returns are really small. I talked with one of the Vanguard advisors a year or so ago since I was thinking it would be worth paying someone to help me, but she actually sounded like she knew less than I do, which is really bad for someone in charge of other people's money.



I talked with someone from Fidelity last week, but he left me feeling confused and didn't seem too enthusiastic or patient with my questions. Also, the closest office is hours away, so it would essentially be all online as well and I'd probably still just go with target funds.



Today I met with an advisor at Schwab. He reviewed the robo advising (SIP), the managed portfolio and Thomas Partners (TPI). He indicated he thought TPI would be best for me. There's a .90 fee for dividend growth or .80 for a balanced income plan for less than 500k. I'm thinking that even after paying his fee, I'd still probably be better off since a real person would be managing my money, yet I'd still be able to monitor things on the web site and have input if/when I wanted it. He seemed pretty confident he can get me better returns that the target funds I've got now, which I believe.



I like that it's a real office near home with a real person I can talk with. He's owned the franchise for years and seems willing to be actively involved in managing my account. Additionally, he will give me a 700$ bonus for transferring the funds from Vanguard and he offers monthly classes on a variety of topics related to finances and retirement. I would probably also transfer most of my emergency fund from my bank since I could get a better rate with Schwab's money market, and he said he would help me set up a brokerage account and show me how to purchase individual stocks and monitor them as well. I'm really interested in that since I'd like to learn to be more active in decisions regarding my financial future and that seems like a good starting point. I'd even like to teach my grandkids eventually so they are encouraged to be active in their financial future early in life (unlike grandma).



Keeping in mind that I truly have very little understanding of how/what to do on my own, please tell me what you think. Are there any big red flags that I might not be seeing? Thank you for any input you can offer.

I tried them briefly and didn’t find them worth the fees. Honestly, you could do better just by investing into the Schwab ETF SCHD that follows the same investing strategy as Thomas Partners.

 

[latexman]

There's a .90 fee for dividend growth

The classical safe withdrawal rate is 4%. His fee is 0.9%. 0.9/4 x 100 = 22.5%.

Why would you want to give him 22.5% of your retirement income?

 

[Smilinggirl]

The classical safe withdrawal rate is 4%. His fee is 0.9%. 0.9/4 x 100 = 22.5%.

Why would you want to give him 22.5% of your retirement income?

As I noted in my original post, my IRAs at Vanguard are barely growing. Even after his fee comes out, it seems like I'll come away with more growth than I'm currently making. While I certainly don't want to give away my retirement income, I do want to have retirement income and I don't seem to be doing a very good job of growing it on my own.

As of right now, my plan is to let this money grow for another 12ish years before I'll need to access it. My 401k is doing better than Vanguard.

What would you suggest for someone who doesn't understand most of the jargon I read here? Is there a way to compare the performance of 2035 target funds at Vanguard vs Fidelity vs Schwab? Should I consider Schwab's managed portfolio or their SIP? He said the managed portfolio fee is .90 with breakpoints (I don't even know what that means). I'd appreciate any helpful input.

 

[DrRoy]

A .90 fee on each $100,000 is $900, so $4,500 on $500,000. And I suspect that you pay any fund or ETF expense fees on top of that. Seems like a waste of money to me.

2022 was a horrible year for most balanced funds as both stocks and bonds went down contrary to the conventional wisdom that when stocks zig that bonds zag.

I have many accounts with Schwab by just manage them myself. You could set up an account at Schwab, get the benefit of a B&M office and someone that you can talk to but without the fee.

The classical safe withdrawal rate is 4%. His fee is 0.9%. 0.9/4 x 100 = 22.5%.

Why would you want to give him 22.5% of your retirement income?

I also look at it this way.

As I noted in my original post, my IRAs at Vanguard are barely growing. Even after his fee comes out, it seems like I'll come away with more growth than I'm currently making. While I certainly don't want to give away my retirement income, I do want to have retirement income and I don't seem to be doing a very good job of growing it on my own.

As of right now, my plan is to let this money grow for another 12ish years before I'll need to access it. My 401k, which is a target fund through Voya is doing better than Vanguard.

What would you suggest for someone who doesn't understand most of the jargon I read here? Is there a way to compare the performance of 2035 target funds at Vanguard vs Fidelity vs Schwab? Should I consider Schwab's managed portfolio or their SIP? He said the managed portfolio fee is .90 with breakpoints (I don't even know what that means). I'd appreciate any helpful input.

I know that there is comfort in having someone to talk to, but it is still expensive. You can look up the returns of each of those target finds and then compare what you find. Keep asking questions here. There are also threads on recommended investment books.

 

[pb4uski]

As I noted in my original post, my IRAs at Vanguard are barely growing. Even after his fee comes out, it seems like I'll come away with more growth than I'm currently making. While I certainly don't want to give away my retirement income, I do want to have retirement income and I don't seem to be doing a very good job of growing it on my own.

As of right now, my plan is to let this money grow for another 12ish years before I'll need to access it. My 401k is doing better than Vanguard.

What would you suggest for someone who doesn't understand most of the jargon I read here? Is there a way to compare the performance of 2035 target funds at Vanguard vs Fidelity vs Schwab? Should I consider Schwab's managed portfolio or their SIP? He said the managed portfolio fee is .90 with breakpoints (I don't even know what that means). I'd appreciate any helpful input.

I don't get the "barely growing" part. VTTHX is roughtly 60% equities and 40% fixed income and has only slightly underperformed a conventional 60/40 portfolio, probably because VTTHX has some foreign stocks and foreign bonds. Below is a comparison from Portfolio Visualizer. The returns are for Nov 2003 (inception of VTTHX) to Jan 2023. Also, 3,5,7 and 10 year roling returns are similar, with VTTHX slightly behind a 60/40 portfolio and STAR, but not alarmingly so.

Portfolio	Initial Balance	Final Balance	CAGR	Stdev	Best Year	Worst Year	Max. Drawdown	Sharpe Ratio	Sortino Ratio	Market Correlation
VTTHX	$10,000	$37,227	7.07%	12.90%	28.17%	-34.66%	-48.05%	0.50	0.71	0.98
60/40	$10,000	$38,493	7.25%	9.43%	21.83%	-20.20%	-30.72%	0.66	0.97	0.99
VGSTX (STAR)	$10,000	$38,555	7.26%	10.67%	24.85%	-25.10%	-35.64%	0.60	0.88	0.97

https://www.portfoliovisualizer.com...ocation3_2=40&symbol4=VGSTX&allocation4_3=100

I wonder if the OP may be experiencing recency bias, but if she has been consistently invested in VTTHX the growth has been reasonable and IMO there is no need for a change.

OP, for the 5 years ended Jan 31, 2023, VTTHX had a total return with dividends reinvested of 4.78%, meanwhile a 60/40 blend had a total return of 5.86% and STAR had a 5.51% total retrn for the 5 years. You could always swap out VTTHX for another blended fund that excludes the foreign stocks and bonds that VTTHX has but you would still have a 0.90% head start over a TPI managed portfolio.

 

[prudent_one]

You say your returns from target funds has been really small. Over a long period of time? Or just recently?

 

[AmigaDude]

...
Is there a way to compare the performance of 2035 target funds at Vanguard vs Fidelity vs Schwab?

Maybe this would help (refining what pb4uski posted):

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Stocks%2FBonds+%2860%2F40%29&portfolioName3=Portfolio+3&symbol1=VTTHX&allocation1_1=100&symbol2=FFTHX&allocation2_2=100&symbol3=SWYFX&allocation3_3=100

Name	Total Return	Annualized Return	Annualized Standard Deviation
3 Month	Year To Date	1 year	3 year	5 year	Full	3 year	5 year
Vanguard Target Retirement 2035 Fund	9.55%	6.20%	-7.77%	4.89%	4.78%	7.44%	16.39%	14.18%
Fidelity Freedom 2035	11.66%	7.23%	-8.23%	6.33%	5.07%	8.42%	18.02%	15.68%
Schwab Target 2035 Index	9.54%	6.58%	-7.03%	5.18%	5.18%	7.54%	16.42%	14.14%
Trailing return and volatility are as of last full calendar month ending January 2023

 

[target2019]

Please discuss further. Many voices here will chime in, and you'll find a strategy that does not require giving away more of your investment income.

List the fund name, account (401k or IRA), amount invested, and a column for investment/total invested. For example:

VXXXX 401(k) $24,000 30%
VXXXZ IRA $56,000 70%
Total ______ $80,000 100%

If you don't want to share the dollar amounts, you can exclude those, and just include the percentage.

If you have CD's and interest accounts, list those also.

 

[Another Reader]

I've had my IRAs in target funds at Vanguard for years. That seemed like the safest choice since I don't have a grasp on how or what to invest in on my own, but the returns are really small. I talked with one of the Vanguard advisors a year or so ago since I was thinking it would be worth paying someone to help me, but she actually sounded like she knew less than I do, which is really bad for someone in charge of other people's money.

I talked with someone from Fidelity last week, but he left me feeling confused and didn't seem too enthusiastic or patient with my questions. Also, the closest office is hours away, so it would essentially be all online as well and I'd probably still just go with target funds.

Today I met with an advisor at Schwab. He reviewed the robo advising (SIP), the managed portfolio and Thomas Partners (TPI). He indicated he thought TPI would be best for me. There's a .90 fee for dividend growth or .80 for a balanced income plan for less than 500k. I'm thinking that even after paying his fee, I'd still probably be better off since a real person would be managing my money, yet I'd still be able to monitor things on the web site and have input if/when I wanted it. He seemed pretty confident he can get me better returns that the target funds I've got now, which I believe.

I like that it's a real office near home with a real person I can talk with. He's owned the franchise for years and seems willing to be actively involved in managing my account. Additionally, he will give me a 700$ bonus for transferring the funds from Vanguard and he offers monthly classes on a variety of topics related to finances and retirement. I would probably also transfer most of my emergency fund from my bank since I could get a better rate with Schwab's money market, and he said he would help me set up a brokerage account and show me how to purchase individual stocks and monitor them as well. I'm really interested in that since I'd like to learn to be more active in decisions regarding my financial future and that seems like a good starting point. I'd even like to teach my grandkids eventually so they are encouraged to be active in their financial future early in life (unlike grandma).

Keeping in mind that I truly have very little understanding of how/what to do on my own, please tell me what you think. Are there any big red flags that I might not be seeing? Thank you for any input you can offer.

Huh? Since when is Schwab franchised? That is a BIG red flag.

In your shoes, I would run away as fast as I could. This guy is selling you products. He will not manage your money, he will put you in one of his products.

If you did not like the first person you met at Fidelity, ask to speak to someone else. You will get better rates for your cash at lots of banks - look at depositaccounts.com. Or buy treasury bills in your self-managed brokerage account. They are paying up to 5 percent.

Fidelity will pay a similar bonus to this guy. People here will help you and point you in the right direction. Educate yourself, with a little time you will understand all the investment types and products. And you will understand when some salesman is blowing smoke.

 

[latexman]

My money is on recency bias.

I've never had Target Date Funds. I just looked up Vanguard's and Fidelity's TDFs for 2025 and 2030. Wow, they really took a hit Jan. - Oct. 2022. They lost 30-35% peak to trough. Bummer, I/we understand your concern; most of us took a hit, I did, some worse than others.

Since Oct. 2022 TDFs have started recovering and are about 10% above the trough now. YTD 2023 returns are about 5%. That's a pretty good recovery, but will it continue?

Inflation numbers (CPI and PPI) were not good this week. The Fed is now talking of raising rates 0.5% next time, while only 0.25% was baked into the market, so don't expect that recovery to keep it's pace, IMHO. But 12 years should be plenty of time to pull out of this mess, I hope!

Financial Advisers are nice to have, but they are deceptively expensive for us non-rich folks as some other posters and I have opined. If you want/need one, by all means get one. But that opens up a whole new can of worms; who to trust with your money? I could not willy nilly just pick one. For me to find someone I trust, I’d have to learn enough about investing so I could judge them. If I’m going to do that, I may as well go a little bit further and do the investing myself and keep that 0.9% AUM fee. That’s my $0.02.

 

[latexman]

Btw, with a TDF, you already have multiple advisers. Each TDF has 1-2 Fund Mangers. The TDF is comprised of a few equity index funds and a few bond funds. Now, each of those 4-ish funds have 1-2 Fund Managers each.

 

[Texas Proud]

Look up the ETrade bonus as it is a lot more than others are offering... and all will match bonuses....


I would not want to pay someone to take care of my investments unless they were a CFP... and even then not for me but my DW... Most of the people at these places are stock brokers and want to sell you stuff...


Now, I did get my sister into Fidelity and her FREE guy has helped her out a lot...

 

[Smilinggirl]

Just wanted to say a quick thank you for the additional responses. Unfortunately, I need this stuff spelled out to me like I was a 5th grader. I appreciate everyone's patience and kindness. I'll respond more closely later this evening, but again, thank you!

 

[marinauser]

What the original poster visited was not an traditional actual Schwab office. Rather, he visited a financial adviser that has signed up to Schwab's franchise program for advisers.

https://franchise.schwab.com/meet-our-franchisees

Such an office, I expect, is never going to recommend simply making your owned educated decisions and managing your own money.

 

[Texas Proud]

Just wanted to say a quick thank you for the additional responses. Unfortunately, I need this stuff spelled out to me like I was a 5th grader. I appreciate everyone's patience and kindness. I'll respond more closely later this evening, but again, thank you!

What the original poster visited was not an traditional actual Schwab office. Rather, he visited a financial adviser that has signed up to Schwab's franchise program for advisers.

https://franchise.schwab.com/meet-our-franchisees

Such an office, I expect, is never going to recommend simply making your owned educated decisions and managing your own money.

If this is true... do not go there... go to a real Schwab office and see what they have... they do have some free stuff to people...


Or go to Fidelity as they also have free advice on accounts... my sister is using them and has said many good things about them... from what I can tell they are giving her good advice...

 

[Another Reader]

What the original poster visited was not an traditional actual Schwab office. Rather, he visited a financial adviser that has signed up to Schwab's franchise program for advisers.

https://franchise.schwab.com/meet-our-franchisees

Such an office, I expect, is never going to recommend simply making your owned educated decisions and managing your own money.

OP - avoid this place like the plague! Shame on Schwab for allowing parasites to used their name!!

 

[Smilinggirl]

I really appreciate the help and suggestions I've received. I took some time today to review my accounts based on what you've written here.

In my tIRA I have VTHRX, VTTHX and TRRJX. In my Roth IRA I have VTTHX. It looks like I'm still down from the high point in 03/2022, even with having done a 7500$ deposit in January, but overall it is inching it's way back up. My expense ratio is 0.08 and my asset mix is 87% stocks, 13% bonds, which is different than the typical recommendation that's closer to 50/50. I'm not sure why or how it's so far different. Is that okay? Maybe I should try to adjust it?

I also did some reading on money market funds and I think I'm going to transfer a big chunk of my emergency fund over to one of those, maybe VMFXX? Not that I could figure out today where or how, but maybe I'll get lucky and be able to reach a helpful person if I call them for help next week. I'll still keep plenty in my regular savings account in my local bank.

I stopped by the library today and picked up a few books (again) on investing basics since some of this stuff seems to be making a little more sense now. I think I'd really like to figure this out enough to even start buying some individual stocks this year, nothing big or anything, but if I can learn more and more, maybe I can start teaching my grandkids when they get a little older so it will come more naturally for them when they're grown.

Also, I appreciate the feedback about the franchise. The fidelity office isn't near enough to visit in person and I find myself wondering if I should just stick with Vanguard.

 

[pb4uski]

DS had some money languishing in a bank yielding next to nothing so we recently transferred the money to his Vanguard taxable brokerage account and it is now sitting in the VMFXX.

 

[latexman]

VTHRX - Vanguard Target Retirement 2030 Fund - 65/35
VTTHX - Vanguard Target Retirement 2035 Fund - 71/29
TRRJX - T. Rowe Price Retirement 2035 Fund - 78/23
VMFXX - Vanguard Federal Money Market Fund

There is nothing wrong with your portfolio. Your YTD return is > 6%. Your asset allocation (AA) of 87/13 seems a bit high based on my searches. See above.

A person’s AA is indicative of the amount of risk they are willing to take. It can change. A young person can take more risk and has more time to recover than a retiree. Some folks here are at 100/0 and some at 0/100. It’s a personal choice coupled with their investing strategy. My AA target is 60/40; it is quite common. I used an AA assessment tool on Fidelity’s website to determine where I was comfortable.

Keep learning. Knowledge is power. May I suggest this thread and this one. I am reading them and learning.

 

[Al18]

As stated above, there’s nothing really wrong with having target date funds in your portfolio, but it’s uncommon to have 3 target funds in your portfolio, because all 3 funds typically own the same company stocks/funds, just different percentages. You may want to consider selling two of these funds, and in their place, buy a Vanguard SP500 index fund and a smaller percentage of a Vanguard Total Market index fund to be more diversified.

I see from your profile you will retire in 2024. Many users on this forum like to keep 3 to 5 years of your yearly expenses in a fixed income fund such as a money market/CD/Treasuries.

Knowledge is power - spend some time reading this forum.

 

[Smilinggirl]

As stated above, there’s nothing really wrong with having target date funds in your portfolio, but it’s uncommon to have 3 target funds in your portfolio, because all 3 funds typically own the same company stocks/funds, just different percentages. You may want to consider selling two of these funds, and in their place, buy a Vanguard SP500 index fund and a smaller percentage of a Vanguard Total Market index fund to be more diversified.

I see from your profile you will retire in 2024. Many users on this forum like to keep 3 to 5 years of your yearly expenses in a fixed income fund such as a money market/CD/Treasuries.

Knowledge is power - spend some time reading this forum.

I have to admit, I'm not even sure how I ended up with 3 target funds in one account, but I think it was from rolling over 401ks. I looked at the other funds you recommended. The problem is that the more I start looking, the more options I find, then I get overwhelmed. Still, I know I can't just keep burying my head in the sand and hoping for the best. I feel as if I need to get a handle on this and understand what my money is doing where and how.

Another question I have from all the reading I've been doing is about MMFs. With my savings account, the interest is just added onto my balance every month (tiny though it is). Does it work the same way with MMF (assuming they stay in the positive)? It looks like they're most recommended for short term, maybe 1-2 years. If the returns are fairly good though, is there any reason not to leave money in them longer?

I'll admit, all the reading I've been doing, coupled with being able to get answers here about what doesn't make sense, has me interested in trying my hand at more active investing, but for now I'd be so happy just to feel like I have a better handle on what I'm already doing.

 

[Smilinggirl]

VTHRX - Vanguard Target Retirement 2030 Fund - 65/35
VTTHX - Vanguard Target Retirement 2035 Fund - 71/29
TRRJX - T. Rowe Price Retirement 2035 Fund - 78/23
VMFXX - Vanguard Federal Money Market Fund

There is nothing wrong with your portfolio. Your YTD return is > 6%. Your asset allocation (AA) of 87/13 seems a bit high based on my searches. See above.

This might be obvious to others, but how can my allocation be different than the funds I'm invested in? Can you manually adjust your allocation, and if so, what's the point of the funds being targeted?

 

[pb4uski]

I have to admit, I'm not even sure how I ended up with 3 target funds in one account, but I think it was from rolling over 401ks. I looked at the other funds you recommended. The problem is that the more I start looking, the more options I find, then I get overwhelmed. Still, I know I can't just keep burying my head in the sand and hoping for the best. I feel as if I need to get a handle on this and understand what my money is doing where and how.

Another question I have from all the reading I've been doing is about MMFs. With my savings account, the interest is just added onto my balance every month (tiny though it is). Does it work the same way with MMF (assuming they stay in the positive)? It looks like they're most recommended for short term, maybe 1-2 years. If the returns are fairly good though, is there any reason not to leave money in them longer?

I'll admit, all the reading I've been doing, coupled with being able to get answers here about what doesn't make sense, has me interested in trying my hand at more active investing, but for now I'd be so happy just to feel like I have a better handle on what I'm already doing.

First, I think that you are overthinking the fund selection, especially if you are going to go with a single balanced fund or ETF. The big decision that you need to make is what you want your asset allocation (AA), percentage of stocks vs percentage of bonds/fixed income to be. For soon-to-be retirees the range is typically anywhere from 40% stocks to 100% stocks. Interestingly, anywhere within that very wide range doesn't seem to impact projected success rates very much. Once you have decided what you want your AA to be, just go find a target date or balanced fund that has close to that AA and you're done.

MMFs work just like a bank account... you put money in and they pay you interest, usually monthly. MMF all have a constant $1 value and you are right, these days they are paying a little more than 4%, which is pretty good. A lot of us are invested in these these days. I recently moved some omney for my son from a bank account that was paying next to nothing to his Vanguard settlement fund that is paying more than 4%.