Vanguard Target Retirement vs Total Admiral?

[purplish]

Is there a difference between choosing Vanguard Target Retirement, vs choosing a mix of Total Stock/Bond/International Admiral?  So far I have an IRA using the Target Retirement for the past couple years- the amount I have now is less than the amount I've put in.  However I know that obviously investing is a long term thing, and I won't see growth right away.  I have mine set to 80/20, if that makes a difference.

[SuperSecretName]

1- minimum required investment.  I think to get admiral ERs you need 10k
2 - ease.  Some people are suited to doing things themselves, others aren't.
3 - rebalancing.  you'll need to do this yourself.

If you can hit admiral with your investment choices, yes, it makes sense to mimic the target date fund in Admiral.  Targets funds don't use admiral for the underlying funds.

You'll get a lower ER

[seattlecyclone]

The Target Retirement funds simply purchase Vanguard's investor class mutual funds shares in a particular ratio. If you have enough money to buy some of those funds in Admiral shares instead you could own the same thing with less fees, but you would need to monitor things to keep it in balance. You'll have to decide for yourself whether a little bit of extra work is worth reducing your expense ratio by something like 0.1%.

[CanuckExpat]

In addition to what others have said, when you get to the point that you've maximised tax advantaged accounts and start investing in taxable accounts, there becomes a difference in how you place funds for tax reasons: buying the individual fund components lets you control that, with the target date funds you can't.

[LeRainDrop]

In addition to what others have said, when you get to the point that you've maximised tax advantaged accounts and start investing in taxable accounts, there becomes a difference in how you place funds for tax reasons: buying the individual fund components lets you control that, with the target date funds you can't.

I just rolled over my Traditional 401(k) and my Roth 401(k) to Vanguard.  I want a pretty basic mix of VFIAX (Vanguard 500 Index Fund Admiral Shares), VTIAX (Vanguard Total International Stock Index Fund Admiral Shares), and VBTLX (Vanguard Total Bond Market Index Admiral), and I've decided on my desired percentages.  However, how do I figure out which of these three funds go best in my Roth IRA account, versus my Traditional IRA account, versus taxable investment account?  Thanks!

ETA:  I already had shares of a Vanguard Target Retirement fund in my Roth IRA, but would rather change that over to the mix of component funds cited above.  Does that sale/exchange generate taxes/fees?

[CanuckExpat]

I just rolled over my Traditional 401(k) and my Roth 401(k) to Vanguard.  I want a pretty basic mix of VFIAX (Vanguard 500 Index Fund Admiral Shares), VTIAX (Vanguard Total International Stock Index Fund Admiral Shares), and VBTLX (Vanguard Total Bond Market Index Admiral), and I've decided on my desired percentages.  However, how do I figure out which of these three funds go best in my Roth IRA account, versus my Traditional IRA account, versus taxable investment account?  Thanks!

My suggestions, others can rip to shreds if I'm wrong:
Put as much (all if possible) of your bond funds into your traditional IRA account. Bonds are tax inefficient, also have lowest expected gain.
If you still have bonds to place after filling up your traditional IRA, place them into Roth IRA. Again, bonds are least tax efficient.
Going to assume all your bonds have been placed by this point. If they haven't, you are probably either overly cautious, or have very large portfolio and should look into other tax advantaged bonds.

Then probably place your US stocks into traditional IRA and/or Roth IRA as you have room, filling up finally with international. Pouring out into taxable with your equities as you run out of room.

Caveat: I don't fully understand the tax implications of international stocks, but I think you get a credit for foreign taxes paid, and you lose that if you hold it in a non-taxable account.

I'm basing the placement of funds on these ideas: Tax-efficient fund placement
There are other ideas but I'm not fully convinced on it.

ETA:  I already had shares of a Vanguard Target Retirement fund in my Roth IRA, but would rather change that over to the mix of component funds cited above.  Does that sale/exchange generate taxes/fees?

If you do the exchange inside Roth IRA, there should be no tax implications for the transaction.

[LeRainDrop]

My suggestions, others can rip to shreds if I'm wrong:
. . .
I'm basing the placement of funds on these ideas: Tax-efficient fund placement

Awesome, CanuckExpat.  I really appreciate your helpful response!  (Yes, I will be able to fit all my bonds into the TIRA -- I previously had them in the T401k.)  This is what my reading and research had been saying, I thought, but then a good friend who I know to have well more than a million dollars invested told me I had it backwards and that I should never put bond funds in the TIRA.  Her certainty on this advice had been making me question my nascent understanding.  I've got The Four Pillars of Investing on my shelf, but it's going to take some time for me to read through it!

[SuperSecretName]

rich does not necessarily equal smart.

for all things investing, read up on bogleheads.org

[TheAnonOne]

100% VTSAX, don't touch it for 20 years....

Easy and rich.

[jjandjab]

Agree with reading the https://www.bogleheads.org/wiki/Tax-efficient_fund_placement link (I have learned alot from that site)

I have a mix of 80% stocks and 20% bonds, and I am in my 40s. The typical advice is not holding bonds in taxable accounts, but that can depend on your tax bracket and the type of bonds (I am in a high bracket and have some state municipal bonds which are US state and federal tax free). T

You may want to consider keeping the 80/20 in each account - as in both my IRA and 401(k) accounts - tax advantaged accounts - I keep the 80/20 mix. That way if the stock market goes down significantly, I can rebalance with bonds, moving some money into stocks as they go lower. Or if stocks skyrocket, I can move some in bonds to ensure (well, almost) those gains won't be lost.

Some people just make sure they have the 80/20 mix across all accounts, i.e. all the bonds in the IRA, but it is really just preference and if you want to be a bit more active managing the accounts.

There is a lot to read and think about and many different strategies. Good luck!

[LeRainDrop]

Thanks, everyone.  I've been going down the bogleheads rabbit hole, and it's very helpful.