I came across your channel through this video-case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.
I was in a 'Retirement Year' fund for 10 wasted years in my 30s to 40s. It was far too conservative and delivering very little growth when I could take some risk, ask that age. I moved its all into higher performing funds and never looked back. I retired at 55, 9 years ago.
@TR4zest Thank you for writing this. I was wondering the same thing. And congratulations on retiring at 55; that is impressive and best wishes on your journey.
Been retired for about 15 months. Have 3-4 years in cash then 3-4 years in Wellington then the rest in the Total market fund. Seems to be working. Wasn't excited about not getting SP500 returns but had to realize its about making it last and not accumulating anymore.
I understand the theory behind these "retirement" funds. When you retire, you need secure income without risk, so they buy high grade bonds and a few conservative stocks, more or less depending on your risk tolerance. But in periods of high inflation like today, fixed income is not so great. Your income won't grow with inflation, and the stock price will fall. If you have to liquidate in an emergency, you lose big. So don't get lulled into thinking these are always the way to go. They are great when inflation is low, or even just steady, but when inflation is rising, they lose real income and stock value. They are right for some people who just don't know anything or don't want to bother, but if you are a well educated investor with time to research investments, you can do better with high dividend stocks, albeit with more risk.
Hi Rob. I am 77 and still working. I inherited an annuity and have been taking RMDs. I have been keeping my money in savings because I can't decide which Vanguard fund or ETF is best for me. What do you think?
When I retire next year it will be either the Wellington fund or balance index fund, both are a 60/40 portfolio. These are two very good moderate conservative funds that average 8-8.75 rate of return with not too many big loss years which even if they did have a down turn for a few years , I have enough cash to hold over
I'm retiring next year as well. I think i will do 4 years in cash (MM and/or HYSA) and the rest in Wellington. Pull from Wellington in up years to replenish cash account and ride out in the down years in cash. Not sure how this will pan out. What do you think?
Rob, would you be able to do a video on how to manage a retirement portfolio and aim to "spend it all or as much as possible without leaving much" for singles? :) I know it's hard to gauge how long one lives, but all strategies such as 4% seem not to withdraw the main pot of portfolio. As a single without commitments, I think many of us are interested in other more suitable strategies - that will also withdraw part of the portfolio as we live and the goal is adjust and leave as little as possible for "others".., I often wonder about it. lol
Rob - how about a podcast on how retirees can invest in IRAs, etc. so that RMDs are covered by dividends and capital gains distributions to avoid having to sell shares in a down market.
Maybe what we need in retirement is a reverse target date fund. Where stocks increase in allocation over time from a low level to allow for sequence of return risk. The duration based on estimated lifespan.
If you are not investment savvy and want a reasonable way to invest, do in target funds and do not fret. You will be ahead of the crowd. No real need for an advisor. I invested regularly in a target fund, and invested smaller amounts in stocks, which helped me to gain a better knowledge of the overall market, etc.. Fidelity and Vanguard are both trustworthy. Do not invest in niche funds like ESG. Sounds good but really just a subjective, marketing gimmick, not necessarily a sound investment strategy.
8:52 Note that it’s easy to mix these to hit a target allocation. Half in 60/40 and half in 80/20 will give you a 70/30 allocation. Anything between the 30/70 and 80/20 extremes requires only two investments.
Growth company funds or stocks....if you cannot handle the risk buy dividend paying stable companies like Verizon? MO? The stock prices do not move much but you can get yourself a 7 to 10 per cent dividend. Cheers!
Good video Rob! I plan on keeping my Vanguard TDF for life. I like its index based structure, diversification, low costs and the fact that it includes TIPS as the target date draws closer. That said, I found (as you pointed out) that it's stock allocation (50%) when the target date is reached was too conservative for my taste so I just chose a fund 5 years beyond my retirement date. So I'll be 60% equities when I retire, then it will go down to 50% 5 years later and, seven years after that, it will be 30% and that is something I can live with as I'll be a lot older by then.
@@joshuaryan8694I it’s in an IRA, but if you choose a TDF in a taxable brokerage account, they are still good as long as you choose a company that uses index funds ( like Vanguard) because index funds are, by design, very tax efficient. Target Date Index Funds are the only type I like.
You don't need to go searching funds and ETFs that match the asset allocation you want. Just buy a pure stock fund and a pure bond fund in the proportions you want to get to the AA you want.
I retired 4 years ago and never invested a cent until after I retired. I have a pension and social security as a lowly civil servant. My investments now are just to see how the market works and if I can prosper as I learn, so be it. I was thrilled to see info on how to invest as a retiree since everything else is aimed towards those who are preparing to retire. You had me until you said I'd have to give up control. Can't do that. At least if I lose, I can blame myself...don't want to lose and pay someone else to do it.
Don't blame you, especially when you don't even know the person or persons knowledge that is making the decisions. What if it's someone right out of college.
@@B126USMCRetirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determines a lot of things. My wife and I both spent same number of years in the civil service, she invested through a wealth manager and myself through 401k. We both still earning after our retirement.
Rob - As usual your input is informative and concise. I have been evaluating going tthis route in lieu of Vannguard Flagship I have been in (been retired 10 years). The allocation in the Wellington fund is consistent with my current holdings🎉. I have fouhd the Flagship Service of value making SS decisions and moving dollars into Roth account. Now that I am almost 72 that value has diminished.. Thanks Again!
All good intimation Rob. I was wondering if you have already discussed TIPS and TIPS funds. like VIPSX vs just buying TIPS directly. I'm mostly in VTSAX and BND but I'm looking to add TIPS to the bond side of my 60/40 mix.
Great topic Rob, much appreciated! Do you or others have any feedback regarding the inability to manually rebalance following a withdrawal if all your eggs are in one strategy retirement fund? I'm currently looking at consolidating and simplifying my portfolio and torn between investing in either one "60/40 Balanced Index Fund" such as VBIAX or two separate total market Stock & Bond funds and perform the rebalancing myself. The unknown for me is how a "Balanced Index" fund allocates withdrawal distributions, do they pull the funds proportionally 60/40 ?
Thank you, Rob, as the tutorial on Asset Allocation Funds was very helpful. I am educating myself in how to move my funds from the accumulation phase of my career into an IRA, upon retirement.
Really liked all this info, personally though i would never recommend a REIT to my worst enemy. Try cashing out a REIT unlike a mutual fund, you have to ask to try to be first in line every quarter and they only let you take out so much. Inherited some REITs and its taking over a year to get them all cashed out.
Some REITs are listed on stock exchanges, so they're more liquid. These include Realty Income and Invitation Homes. Although, I still wouldn't recommend them. They're no safer than stocks and they underperform.
I’m not a fan of the Vanguard life strategy funds because Vanguard for some reason uses the more expensive “investor” share class instead of admiral shares to make up the fund. It still is a generally fair price, but that choice makes me question the motives of those designing the funds.
Do bond funds work? It seems to me, at this time in history, you are just better off investing in 5-year Treasuries and know exactly what interest rate you will receive.
Rob talks about the Wellington fund admiral shares. But you need $50k minimum investment. That's ok for some people, but for me I need a place to invest some of my monthly pension money. The Wellington investor shares require $3k minimum. The difference: admiral shares expense ration is 0.18%. Investor shares is 0.26%. I'm going for the investor shares and putting in $500/month. But if you got the bucks, the admiral shares is the place to be.
Rob, I was a 401K administrator for several companies over the years. I found the target date funds significantly underperformed the market for overall fund return. I know they have a mixture of stocks and bonds depending on the the retiremnet date. Ive listened to several of your videos and enjoy them immensly, how come you do not focus at all on total returns for the funds? You seem to focus on fees and asset allocation.
Rob believes in holding a mix of stocks and bonds and international diversification. If you watch his videos on his own personal portfolio, it’s very similar to a TDF. So the reason he pushes it so much is because he obviously prefers safety and diversity over “total returns”
Thank you Rob for your thoughtful choice of topics that are very helpful to retired DIY investors like me. Very helpful overview of good options for those who prefer KISS. I did not realize your last point regarding the old target date funds continuing to modify allocations after "expiration" date. Also appreciate the brevity in communicating the information. Buckeys #1? Ha, overrated. Go Blue! - Bill s.
Rob...WHY complicate it and pay higher fees. You can buy the components of these Lifestyle funds on your own and save 10 bps. Is it the convenience of having them do the rebalancing?
Honestly, as you age you should ALSO be changing your asset allocation to be more conservative. So, maybe instead of targeting your retirement year .. you target your longevity year. For instance.. if you have a retirement plan to make your money last until you are 90 years old, and the year you turn 90 is 2060, then you could choose that year and the fund shifts for your longevity downcount.
I plan to retire in a few years time and have our money tied up in Vanguard index funds etc just in case im not missing anything would you sell stocks on a monthly basis or annually to live off?
The performance of this target date funds have been horribly for some years now. There are many articles indicating that in an environment where bonds and stocks underperformed at the same time, which has been the case for several years, this is not a good investment. Just think about selling them to comply with the RMD every year and you get the picture. Owning a small percentage will work as a diversification, but never a substantial amount of your portfolio
Yes, it does. But, as Rob pointed you loose some of the simplicity. You pick the asset allocation and you have to do the rebalancing. Not, that big of a deal. But, some people may not want to do the rebalancing. I would certainly pick your option.
This works well if you aren’t taking distributions. But, I’m taking distributions, so I want separate asset classes in my portfolio so I can take distributions from the winners, rather than the losers or the average of the portfolio.
thanks for the effort and sharing. i am an appreciative subscriber. my problems with these funds is on the bonds side. since i am now in the very beginning of my retirement, i prefer my bonds to truly act as a safety net to my equity holdings. i want my bonds to be short term/intermediate term treasury funds/etfs. i do not want long term bonds with their exposure to interest rates. i do not want corporate bonds with their exposure to credit risk. i do not want international bonds with their exposure to currency risk. that said, while i was in my accumulation phase, i invested in both Vanguard Target Date funds and Wellington Admiral. both had decent results and made investing more automatic and that was a good thing! thumbs up.
Long-term government bonds are only volatile if you plan on selling before maturity. If you wait until maturity, they're safer than short-term bonds because you're not exposed to any interest rate cuts. My recommendation would be, get Treasury Inflation-Protected Securities with a maturity date after you expect to die. That way, you will have predictable income which keeps up with inflation.
Our peak era is gone, with 401(k)s failing in the recession. My $750K retirement portfolio shrinks with inflation. I fear leaders repeat history's mistakes. If rising costs worry your retirement, I empathize. Foreign policies, regulations, and energy policies are chaotic.
I like target retirement funds and life strategy funds but right now I love the combination of S&P 500 fund and CDs. You decide the risk ratio depending on your age, risk tolerance, and when you will need the money. Fidelity CDs are paying 5.3% while the S&P gained 20% this year. These are good times to be an investor. BTW, Fidelity's S&P expense ratio is .015%. That's almost free!
I like Vanguard but like to be involved, I keep it simple with Large Cap funds, CD ladders, money market/auto default VMXFF, balance and move things around a bit
Rob, i just don't like these funds for retirement because they are so limited in what you can invest in. like 20% in stock& 80% in bonds, what if we could enter into a raising interest environment for the next 15- 20 years. Your bond fund becomes trash. And stocks might not do well during inflation or high-interest rates. Where do you really go? Most of these retirement funds are not really prepared for what is coming up ahead of us. They did well in the last 40 years as interest drops but the next 40 years might not be the same.
Hey Rob great episode. I know it's not your Forte but would you consider doing an episode about Social Security and spousal benefits. There's a lot on the internet about this but I trust you the most
Thanks for a helpful discussion! I have heard that after retirement and outside of an IRA putting your assets in an asset allocation fund has negative tax consequences so it is not a good idea. Do you agree and please comment/ explain this?
The problem with target funds is that they have too much in bond funds. Bonds are fine, but bond funds are a disater IMO. You have no control over the bonds in the fund, a good bond portfolio may return 2-3% on average but have the potential for 20% downside like in 2022.
I am retired with 2 pensions fortunately. I have 60% in cash mostly in a HYSA and 5% CDs. I have 2 ETFs in stocks and real estate which makes up the other 40%. I have no debt. Is that too aggressive? Thanks for the video
Too aggressive? No, I'd say way too conservative. We live off pensions and SS and don't need money from our IRAs. So we are invested like a long term investor, but keeping in mind RMDs. I'd say in the main IRA (rollover from husband's 401k), we have about 70% stock mutual funds, 20% in bonds within a balanced mutual fund, and about 10% in money market or CDs getting about 5%. Our Roths are all in stock funds. Just my opinion, of course.
All fine and good, but how does one know what asset allocation one wants? I haven't a clue. I retired in 2020 at age 71 (due to COVID) with a target retirement 2015 with Vanguard. I've let them choose at 30% stocks and 70% bonds.
Hi Rob, thanks so much for your videos. I’ve been learning lots. I have a few questions that cover this and other topics. 1. Why would anyone own QQQ if they could own QQQM which is pretty much following the same nasdaq index, but is cheaper? 2. Why would anyone own VOO if they could own SPDR which is pretty much following the same S &P 500, but is cheaper? 3. Why would anyone own more than 1 Roth IRA if at the end of the day, you can only ever max on with contributing $7300, or whatever annual max contribution it is? Why would someone do the work to establish more than one Roth IRA if that’s the case? Am I missing something? CAN I contribute more than $7300 if I set up more than one Roth IRA? I just don’t understand what the advantage would be. Thank you soooooo much for your help with these questions. I’d like to make switches to the first two questions today (get out of VOO and trade for SPDR,…) but don’t want to do anything too hasty. Have a great day and thanks again, Rob! Regine 😊
Rob, my fellow buckeye. We are retired, new to investing, and just surviving. We’ve had our meager 401 leftovers with Edward Jones since we didn’t know any better. I think this would be a better option for us, but I wouldn’t know who to trust for going forward with it advice…….🤔. P.S. we live in Florida
Right now in my IRA brokerage account, I’m laddering T-Bills and may eventually move into T Notes and Bonds when yield curves get above water. But, it seems the tax exempt advantage of the Treasuries will be lost - come the time I move money out of my IRA. So is this where TIPS may offer an advantage in a retirement account or does somehow the interest earned on T-Bills while in an IRA account maintain their tax exempt status when withdrawn into regular income?
So in these funds of funds, aren’t you paying management fees on both the fund itself and also on the underlying funds? That’s a lot of management fees.
Great video love the content. I’m currently 55 years old and probably will retire between 62 and 65. I am a Fidelity customer and I don’t know if I am needing stocks or ETF now that paid dividends or do I don’t worry about dividends now and just worry about the growth I’m stuck in confused on where to go..
I have a ? I live and work in Puerto Rico if I open an Roth IRA with one of the mention funds and brokarage will I loose tax benefits like paying federal and state taxes? Thanks.
Are the % management fees the only fees paid? Are there annual/entry/exit/etc fees or any other fees by any other name that should be considered? Thank you!!
So what are the pros and cons of simply putting an IRA into only one asset allocation ETF (if it matches your desired portfolio balance) vs using the 3 Fund Portfolio method? Seems the asset allocation ETF's automatic rebalancing would make it even easier vs having to manually rebalance the 3 Fund Portfolio?
If you have a pension to live off of then you should be in stocks until you die so your money keeps growing. If your investment account is all you've got then I can see wanting to not have huge swings when the market goes up and down.
Be careful with retirement date funds. Just because your retired doesnt mean u need as much of a bond exposure. If social security and pensions cover all or most of your expenses then u may want to invest more aggressively if you dont need your investments for income
Another well done video of yours. Thanks. Just watched your other video on the Bucket Strategy being flawed (in sum, rebalance your portfolio each year is better). Do these fixed allocation funds accomplish the same thing or would it be better to have say two types of funds; diversified fixed and diversified equity and rebalance the 2 every year?
It seems reasonable for these target date funds, but I'm still unsure. If the market is DOWN how do you draw out of bonds (not stocks) and when the market is UP, do the opposite? If we are forced to sell both stocks and bonds in these funds, it seems like it is not the best strategy. What am I missing?
According to Dave Ramsey a bond fund is not that much more conservative and has underperformed stocks by a large gap. He said stay in 5 star mutual funds. Dont need no cookie cutter assignment that doesnt take into fact the terrain we are in now. George says and so does goldman we will have a low growth over the next 10 years so your better off in dividend stocks .
I came across your channel through this video-case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.
Hats off to Vanguard for TRYING to simplify investing during all our life stages...
They are making a lot of money on it. There is a fee for managed funds.
@@Trying858 Hats off to Vanguard for TRYING to simplify investing during all our life stages...
They are not on your side...... Lets not be naive
@@Trying858 Expense Ratio is only 0.14% for VASGX - seems like a pretty low cost fund
You may want to look at Vanguard and ESG. SCARY
Why invest in Vanguard Moderate Growth at a 0.13% expense ratio when you can just buy the 4 component funds with a net expense ratio of about 0.05%?
The fund auto rebalances, this may be of value if a spouse is not interested or able to manage the funds properly. It is a set and forget option.
I was in a 'Retirement Year' fund for 10 wasted years in my 30s to 40s. It was far too conservative and delivering very little growth when I could take some risk, ask that age. I moved its all into higher performing funds and never looked back. I retired at 55, 9 years ago.
@TR4zest Thank you for writing this. I was wondering the same thing. And congratulations on retiring at 55; that is impressive and best wishes on your journey.
Wellesley has taken a beating this year. It’s done really well in years past.
Yes it has so great time to buy in.
Been retired for about 15 months. Have 3-4 years in cash then 3-4 years in Wellington then the rest in the Total market fund. Seems to be working. Wasn't excited about not getting SP500 returns but had to realize its about making it last and not accumulating anymore.
I appreciate you and your channel. This was a very thought provoking video- I subscribed today.
I understand the theory behind these "retirement" funds. When you retire, you need secure income without risk, so they buy high grade bonds and a few conservative stocks, more or less depending on your risk tolerance. But in periods of high inflation like today, fixed income is not so great. Your income won't grow with inflation, and the stock price will fall. If you have to liquidate in an emergency, you lose big. So don't get lulled into thinking these are always the way to go. They are great when inflation is low, or even just steady, but when inflation is rising, they lose real income and stock value. They are right for some people who just don't know anything or don't want to bother, but if you are a well educated investor with time to research investments, you can do better with high dividend stocks, albeit with more risk.
Hi Rob. I am 77 and still working. I inherited an annuity and have been taking RMDs. I have been keeping my money in savings because I can't decide which Vanguard fund or ETF is best for me. What do you think?
G8r ideas but T-Bills are good enough for now. The yields are above 5%
5% versus 10-15% returns? you are leaving too much money on the table, Look at a 10 year projection with only a 3-5% returns and its huge over time!
Watch the greed index and follow Warren buffett's advice. Buy when others are fearful... Right now others are still greedy!
When I retire next year it will be either the Wellington fund or balance index fund, both are a 60/40 portfolio. These are two very good moderate conservative funds that average 8-8.75 rate of return with not too many big loss years which even if they did have a down turn for a few years , I have enough cash to hold over
I'm retiring next year as well. I think i will do 4 years in cash (MM and/or HYSA) and the rest in Wellington. Pull from Wellington in up years to replenish cash account and ride out in the down years in cash. Not sure how this will pan out. What do you think?
Rob, would you be able to do a video on how to manage a retirement portfolio and aim to "spend it all or as much as possible without leaving much" for singles? :) I know it's hard to gauge how long one lives, but all strategies such as 4% seem not to withdraw the main pot of portfolio. As a single without commitments, I think many of us are interested in other more suitable strategies - that will also withdraw part of the portfolio as we live and the goal is adjust and leave as little as possible for "others".., I often wonder about it. lol
Go to “FI Calc” and use their retirement draw calculator. You can choose a withdrawal option that spends it all at the end of your investment period.
I don't care for annuities for myself. But one with an inflation rider might be just right for you.
Rob - how about a podcast on how retirees can invest in IRAs, etc. so that RMDs are covered by dividends and capital gains distributions to avoid having to sell shares in a down market.
Seeking Alpha and lots of dividend portfolio advice on youtube. It's a different strategy than what is here.
Maybe what we need in retirement is a reverse target date fund. Where stocks increase in allocation over time from a low level to allow for sequence of return risk. The duration based on estimated lifespan.
Great presentation. For me these funds have to much international equity exposure. I think that is reflected in the average returns.
If you are not investment savvy and want a reasonable way to invest, do in target funds and do not fret. You will be ahead of the crowd. No real need for an advisor. I invested regularly in a target fund, and invested smaller amounts in stocks, which helped me to gain a better knowledge of the overall market, etc.. Fidelity and Vanguard are both trustworthy. Do not invest in niche funds like ESG. Sounds good but really just a subjective, marketing gimmick, not necessarily a sound investment strategy.
Interesting. These would presumably simplify the annual distribution issue but simply selling shares and not worrying about which funds to sell
exactly what i was thinking. seems there's should be a "catch" to it though, if it makes it simpler, beyond giving up some control, as Rob points out.
8:52 Note that it’s easy to mix these to hit a target allocation. Half in 60/40 and half in 80/20 will give you a 70/30 allocation. Anything between the 30/70 and 80/20 extremes requires only two investments.
Invest in these funds, but always watch them. I learned a long time ago that Nobody but Nobody Takes Care of You Like Yourself.....
Growth company funds or stocks....if you cannot handle the risk buy dividend paying stable companies like Verizon? MO? The stock prices do not move much but you can get yourself a 7 to 10 per cent dividend. Cheers!
Bonds are not always a conservative investment, it depends where they are in price and the rate environment.
Now is the best time in 15 yrs to invest in bonds.
True. Duration risk. Keep them short dated if you need to.
Good video Rob! I plan on keeping my Vanguard TDF for life. I like its index based structure, diversification, low costs and the fact that it includes TIPS as the target date draws closer. That said, I found (as you pointed out) that it's stock allocation (50%) when the target date is reached was too conservative for my taste so I just chose a fund 5 years beyond my retirement date. So I'll be 60% equities when I retire, then it will go down to 50% 5 years later and, seven years after that, it will be 30% and that is something I can live with as I'll be a lot older by then.
Is your target date fund in a taxable brokerage? People have told me not to use target date funds because of tax consequences.
@@joshuaryan8694I it’s in an IRA, but if you choose a TDF in a taxable brokerage account, they are still good as long as you choose a company that uses index funds ( like Vanguard) because index funds are, by design, very tax efficient. Target Date Index Funds are the only type I like.
Nice video. I tried to manage my own stocks, but ended up with homes“analysis paralysis” and haven’t done well this year.
You don't need to go searching funds and ETFs that match the asset allocation you want. Just buy a pure stock fund and a pure bond fund in the proportions you want to get to the AA you want.
Unless your pretty late in life the total market index fund beats all target date funds from 20 years old to 50's and 60's.
But you have to accept the drawdown, it's easy looking back, but when the sky is falling today it feels bad.
@@gg80108 yep, time in the market rewards, not timing the market.
I decided years ago that 60/40 stock/bond is my comfort level. For better or worse, its vanguard balanced index fund for much of my portfolio.
I retired 4 years ago and never invested a cent until after I retired. I have a pension and social security as a lowly civil servant. My investments now are just to see how the market works and if I can prosper as I learn, so be it. I was thrilled to see info on how to invest as a retiree since everything else is aimed towards those who are preparing to retire. You had me until you said I'd have to give up control. Can't do that. At least if I lose, I can blame myself...don't want to lose and pay someone else to do it.
Don't blame you, especially when you don't even know the person or persons knowledge that is making the decisions. What if it's someone right out of college.
Not me, I have been investing since the 1980s and prefer mutual funds to individual stocks. Maybe I ain’t that smart, but just lucky.
@@joycef8443 Did you have capital gains annually from your mutual funds? How did you deal with the taxes?
@@joycef8443 I hear you...however, I only see...3 thumbs....up...4...ur....post....Not...very...convincing
@@B126USMCRetirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determines a lot of things. My wife and I both spent same number of years in the civil service, she invested through a wealth manager and myself through 401k. We both still earning after our retirement.
Rob - As usual your input is informative and concise. I have been evaluating going tthis route in lieu of Vannguard Flagship I have been in (been retired 10 years). The allocation in the Wellington fund is consistent with my current holdings🎉. I have fouhd the Flagship Service of value making SS decisions and moving dollars into Roth account. Now that I am almost 72 that value has diminished.. Thanks Again!
All good intimation Rob. I was wondering if you have already discussed TIPS and TIPS funds. like VIPSX vs just buying TIPS directly. I'm mostly in VTSAX and BND but I'm looking to add TIPS to the bond side of my 60/40 mix.
Great topic Rob, much appreciated! Do you or others have any feedback regarding the inability to manually rebalance following a withdrawal if all your eggs are in one strategy retirement fund? I'm currently looking at consolidating and simplifying my portfolio and torn between investing in either one "60/40 Balanced Index Fund" such as VBIAX or two separate total market Stock & Bond funds and perform the rebalancing myself. The unknown for me is how a "Balanced Index" fund allocates withdrawal distributions, do they pull the funds proportionally 60/40 ?
Thank you, Rob, as the tutorial on Asset Allocation Funds was very helpful. I am educating myself in how to move my funds from the accumulation phase of my career into an IRA, upon retirement.
Great info, loved this video!
Really liked all this info, personally though i would never recommend a REIT to my worst enemy. Try cashing out a REIT unlike a mutual fund, you have to ask to try to be first in line every quarter and they only let you take out so much. Inherited some REITs and its taking over a year to get them all cashed out.
Some REITs are listed on stock exchanges, so they're more liquid. These include Realty Income and Invitation Homes.
Although, I still wouldn't recommend them. They're no safer than stocks and they underperform.
My wife's 401k is in one of these type funds - set and forget. I prefer to be more hands-on.
You mixed up Wellington and Windsor @ 6:14
Really goof video. Thank you I am now a follower.
I’m not a fan of the Vanguard life strategy funds because Vanguard for some reason uses the more expensive “investor” share class instead of admiral shares to make up the fund. It still is a generally fair price, but that choice makes me question the motives of those designing the funds.
i recently bought the moderate growth one. it looks promising. i like that it also has some international investments
Do bond funds work? It seems to me, at this time in history, you are just better off investing in 5-year Treasuries and know exactly what interest rate you will receive.
Bond funds are good to buy if you expect interest rates to go lower, which is right now.
Can you please provide any assistance with someone that does not have a IRA or Roth. What to invest in and provide tax issues, thank you.
Thanks Rob, this was another great one. -
Rob talks about the Wellington fund admiral shares. But you need $50k minimum investment. That's ok for some people, but for me I need a place to invest some of my monthly pension money. The Wellington investor shares require $3k minimum. The difference: admiral shares expense ration is 0.18%. Investor shares is 0.26%. I'm going for the investor shares and putting in $500/month. But if you got the bucks, the admiral shares is the place to be.
Are these iShares Life Path ETFs a good choice for a taxable brokerage account?
Rob,
I was a 401K administrator for several companies over the years. I found the target date funds significantly underperformed the market for overall fund return. I know they have a mixture of stocks and bonds depending on the the retiremnet date. Ive listened to several of your videos and enjoy them immensly, how come you do not focus at all on total returns for the funds? You seem to focus on fees and asset allocation.
Rob believes in holding a mix of stocks and bonds and international diversification. If you watch his videos on his own personal portfolio, it’s very similar to a TDF. So the reason he pushes it so much is because he obviously prefers safety and diversity over “total returns”
Great analysis
Thank you for your straight forward excellent presentation. I'm thoroughly impressed.
Thank you Rob for your thoughtful choice of topics that are very helpful to retired DIY investors like me. Very helpful overview of good options for those who prefer KISS. I did not realize your last point regarding the old target date funds continuing to modify allocations after "expiration" date. Also appreciate the brevity in communicating the information.
Buckeys #1? Ha, overrated. Go Blue! - Bill s.
I am surprised that some of these funds have a heavy weight in international equities and bonds.
Rob...WHY complicate it and pay higher fees. You can buy the components of these Lifestyle funds on your own and save 10 bps. Is it the convenience of having them do the rebalancing?
Honestly, as you age you should ALSO be changing your asset allocation to be more conservative. So, maybe instead of targeting your retirement year .. you target your longevity year. For instance.. if you have a retirement plan to make your money last until you are 90 years old, and the year you turn 90 is 2060, then you could choose that year and the fund shifts for your longevity downcount.
That is sound advice; thank you for writing this!
I plan to retire in a few years time and have our money tied up in Vanguard index funds etc just in case im not missing anything would you sell stocks on a monthly basis or annually to live off?
The performance of this target date funds have been horribly for some years now. There are many articles indicating that in an environment where bonds and stocks underperformed at the same time, which has been the case for several years, this is not a good investment. Just think about selling them to comply with the RMD every year and you get the picture. Owning a small percentage will work as a diversification, but never a substantial amount of your portfolio
Yeah. In a market like 2022 where equities and bonds were both down changed the rules of the game.
I like the Wellington fund vwenx, since I’m close to retirement I’ve added it to my ira.
Doesn't Total Stock Market (VTSAX) with Total Bond Market (VBTLX) give us simplicity AND control?
Yes, it does. But, as Rob pointed you loose some of the simplicity. You pick the asset allocation and you have to do the rebalancing. Not, that big of a deal. But, some people may not want to do the rebalancing. I would certainly pick your option.
I agree. It’s a matter of preference.
As he said just options.
I am not sure, but it seems to me we have to pay 1% for buying Vanguard total bond mutual fund.
Where should we people put our non Ira/ roth (cash) savings when we are 5-6 years from retirement? Love your videos.
This works well if you aren’t taking distributions. But, I’m taking distributions, so I want separate asset classes in my portfolio so I can take distributions from the winners, rather than the losers or the average of the portfolio.
thanks for the effort and sharing. i am an appreciative subscriber. my problems with these funds is on the bonds side. since i am now in the very beginning of my retirement, i prefer my bonds to truly act as a safety net to my equity holdings. i want my bonds to be short term/intermediate term treasury funds/etfs. i do not want long term bonds with their exposure to interest rates. i do not want corporate bonds with their exposure to credit risk. i do not want international bonds with their exposure to currency risk. that said, while i was in my accumulation phase, i invested in both Vanguard Target Date funds and Wellington Admiral. both had decent results and made investing more automatic and that was a good thing! thumbs up.
Long-term government bonds are only volatile if you plan on selling before maturity. If you wait until maturity, they're safer than short-term bonds because you're not exposed to any interest rate cuts.
My recommendation would be, get Treasury Inflation-Protected Securities with a maturity date after you expect to die. That way, you will have predictable income which keeps up with inflation.
If you invest in a total bond fund then by definition you are investing in an intermediate bond fund.
Our peak era is gone, with 401(k)s failing in the recession. My $750K retirement portfolio shrinks with inflation. I fear leaders repeat history's mistakes. If rising costs worry your retirement, I empathize. Foreign policies, regulations, and energy policies are chaotic.
I like target retirement funds and life strategy funds but right now I love the combination of S&P 500 fund and CDs. You decide the risk ratio depending on your age, risk tolerance, and when you will need the money. Fidelity CDs are paying 5.3% while the S&P gained 20% this year. These are good times to be an investor. BTW, Fidelity's S&P expense ratio is .015%. That's almost free!
what is ratio of S&P 500 fund and CD
Which fund are you talking about with the 0.015% expense ratio?
Rob-- great video--- very helpful to me as i am retiring in 6 mos. Thank you!
what happens to the fund when the target year comes around? Does it liquidate? transfer to another fund???
they tend to become more static and become a balanced fund. I personally would avoid Target Date Funds for retirees.
I like Vanguard but like to be involved, I keep it simple with Large Cap funds, CD ladders, money market/auto default VMXFF, balance and move things around a bit
Rob, i just don't like these funds for retirement because they are so limited in what you can invest in. like 20% in stock& 80% in bonds, what if we could enter into a raising interest environment for the next 15- 20 years. Your bond fund becomes trash. And stocks might not do well during inflation or high-interest rates. Where do you really go? Most of these retirement funds are not really prepared for what is coming up ahead of us. They did well in the last 40 years as interest drops but the next 40 years might not be the same.
great video Rob! Thank you!
Hey Rob great episode. I know it's not your Forte but would you consider doing an episode about Social Security and spousal benefits. There's a lot on the internet about this but I trust you the most
Sorry, Rob, what are TIPS?
Inflation protected Treasuries
How do you handle with mult accts esp taxable?
Greetings from Malaysia. Thank you Rob for another great video and sharing! So helpful!
Thanks for a helpful discussion! I have heard that after retirement and outside of an IRA putting your assets in an asset allocation fund has negative tax consequences so it is not a good idea. Do you agree and please comment/ explain this?
How do you consolidate your funds to get them all into a life strategy fund? Isn’t there a big tax bill coming from capital gains gains in a taxable?
The problem with target funds is that they have too much in bond funds. Bonds are fine, but bond funds are a disater IMO. You have no control over the bonds in the fund, a good bond portfolio may return 2-3% on average but have the potential for 20% downside like in 2022.
Looking into this stuff to help my dad out. You gave me some good key terms to work off of and some great information. Cheers!
I am retired with 2 pensions fortunately. I have 60% in cash mostly in a HYSA and 5% CDs. I have 2 ETFs in stocks and real estate which makes up the other 40%. I have no debt. Is that too aggressive? Thanks for the video
Too aggressive? No, I'd say way too conservative. We live off pensions and SS and don't need money from our IRAs. So we are invested like a long term investor, but keeping in mind RMDs. I'd say in the main IRA (rollover from husband's 401k), we have about 70% stock mutual funds, 20% in bonds within a balanced mutual fund, and about 10% in money market or CDs getting about 5%. Our Roths are all in stock funds. Just my opinion, of course.
All fine and good, but how does one know what asset allocation one wants? I haven't a clue. I retired in 2020 at age 71 (due to COVID) with a target retirement 2015 with Vanguard. I've let them choose at 30% stocks and 70% bonds.
Hi Rob, thanks so much for your videos. I’ve been learning lots. I have a few questions that cover this and other topics.
1. Why would anyone own QQQ if they could own QQQM which is pretty much following the same nasdaq index, but is cheaper?
2. Why would anyone own VOO if they could own SPDR which is pretty much following the same S &P 500, but is cheaper?
3. Why would anyone own more than 1 Roth IRA if at the end of the day, you can only ever max on with contributing $7300, or whatever annual max contribution it is? Why would someone do the work to establish more than one Roth IRA if that’s the case? Am I missing something? CAN I contribute more than $7300 if I set up more than one Roth IRA? I just don’t understand what the advantage would be.
Thank you soooooo much for your help with these questions. I’d like to make switches to the first two questions today (get out of VOO and trade for SPDR,…) but don’t want to do anything too hasty.
Have a great day and thanks again, Rob!
Regine 😊
Rob, my fellow buckeye. We are retired, new to investing, and just surviving. We’ve had our meager 401 leftovers with Edward Jones since we didn’t know any better. I think this would be a better option for us, but I wouldn’t know who to trust for going forward with it advice…….🤔. P.S. we live in Florida
I don't see any links for things you mentioned for Fidelity 😞
Right now in my IRA brokerage account, I’m laddering T-Bills and may eventually move into T Notes and Bonds when yield curves get above water. But, it seems the tax exempt advantage of the Treasuries will be lost - come the time I move money out of my IRA. So is this where TIPS may offer an advantage in a retirement account or does somehow the interest earned on T-Bills while in an IRA account maintain their tax exempt status when withdrawn into regular income?
Wh6 not CDs. The tax advantage goes away in an IRA
So in these funds of funds, aren’t you paying management fees on both the fund itself and also on the underlying funds? That’s a lot of management fees.
Great video love the content. I’m currently 55 years old and probably will retire between 62 and 65. I am a Fidelity customer and I don’t know if I am needing stocks or ETF now that paid dividends or do I don’t worry about dividends now and just worry about the growth I’m stuck in confused on where to go..
What is your take on Schwab Intelligent Portfolio (SIP) product?
I have been researching that too as a way to get diversity with low fees.
I have a ? I live and work in Puerto Rico if I open an Roth IRA with one of the mention funds and brokarage will I loose tax benefits like paying federal and state taxes? Thanks.
All I want to know is what is the return on these funds. Could you please disclose this in your videos.
I hate the target date fund i selected. Yes, its way to conservative when you get to the retirement age. Better with a ETF like SCHD.
Are the % management fees the only fees paid? Are there annual/entry/exit/etc fees or any other fees by any other name that should be considered? Thank you!!
I thought the idea in retirement is to sell from the bond fund for needed income during downturns.
I think you would do much better to just buy BIL and SPY and adjust ratio to your liking
So what are the pros and cons of simply putting an IRA into only one asset allocation ETF (if it matches your desired portfolio balance) vs using the 3 Fund Portfolio method? Seems the asset allocation ETF's automatic rebalancing would make it even easier vs having to manually rebalance the 3 Fund Portfolio?
If you have a pension to live off of then you should be in stocks until you die so your money keeps growing. If your investment account is all you've got then I can see wanting to not have huge swings when the market goes up and down.
great video Rob.. thanks
would converting from target date to in retirement fund have tax consequences in a taxable account or would it be close enough to a wash sale?
Let’s see if he mentions VWENX
Vanguard Wellington Fund Admiral Shares
Rob passed the test - he may now produce more educational videos.😁
@@gregwessels7205 and the V for Vendeda fan cheered.
Be careful with retirement date funds. Just because your retired doesnt mean u need as much of a bond exposure. If social security and pensions cover all or most of your expenses then u may want to invest more aggressively if you dont need your investments for income
VASGX return is 37% for the last 5 years. That seems low ?
Another well done video of yours. Thanks. Just watched your other video on the Bucket Strategy being flawed (in sum, rebalance your portfolio each year is better). Do these fixed allocation funds accomplish the same thing or would it be better to have say two types of funds; diversified fixed and diversified equity and rebalance the 2 every year?
Wellington!
What advice do you give for already "retired" people about 80 years old??
It seems reasonable for these target date funds, but I'm still unsure. If the market is DOWN how do you draw out of bonds (not stocks) and when the market is UP, do the opposite? If we are forced to sell both stocks and bonds in these funds, it seems like it is not the best strategy. What am I missing?
Clear and informative TY
According to Dave Ramsey a bond fund is not that much more conservative and has underperformed stocks by a large gap. He said stay in 5 star mutual funds. Dont need no cookie cutter assignment that doesnt take into fact the terrain we are in now. George says and so does goldman we will have a low growth over the next 10 years so your better off in dividend stocks .
Would like to know if you have an opinion on Baird financial and how they invest