Author Topic: Target retirement funds vs VTSAX  (Read 9003 times)

use2betrix

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Target retirement funds vs VTSAX
« on: November 20, 2015, 06:31:11 AM »
I am a bit undecided where to allocate my investments. I was surprised to see people putting their 401k's and Roth IRA's in VTSAX, but it makes sense.

So far I've been putting my Roth IRA and 401k contributions into target retirement funds (2045, even though that's way after I'll retire, just more aggressive which I want) and my taxable investments have been into VTSAX. Once I hit 100k or so in my VTSAX I'll probably diversify a little more.

I'm 27 by the way.

Is my current path fine? Would you suggest anything different? I only have about 50k invested right now between the 3 avenues mentioned above, but have quite a bit of cash I need to invest. Am currently maxing out my 401k and Roth IRA for my fiancÚ and myself. 

GoldenStache

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Re: Target retirement funds vs VTSAX
« Reply #1 on: November 20, 2015, 07:29:17 AM »
54.4% of 2045 is VTSAX.  If you want to be more aggressive why not do 100% VTSAX and save .13% in expense fees (difference between 2045 and VTSAX)?

I do not like the target funds because of % of bond funds.

Shane

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Re: Target retirement funds vs VTSAX
« Reply #2 on: November 20, 2015, 08:00:40 AM »
54.4% of 2045 is VTSAX.  If you want to be more aggressive why not do 100% VTSAX and save .13% in expense fees (difference between 2045 and VTSAX)?

I do not like the target funds because of % of bond funds.

+1

Yeah, why pay .18% for VTIVX when you can get VTSAX for .05%? At your age, 100% stocks is the way to go. Check out this article by Go Curry Cracker:

The Path to 100% Equities

Tjat

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Re: Target retirement funds vs VTSAX
« Reply #3 on: November 20, 2015, 09:13:20 AM »
Even if you are gun shy about 100% VTSAX, you can set up an asset allocation of VTSAX and VBTLX and do automatic rebalancing. The only "benefits" of a target date fund is that it changes your asset allocaton automatically for an additional fee - something you can do in 5 minutes if you wanted. For early retirees, it can be argued that target date funds are way too conservative (which you apparently realize), so I don't see the point.

use2betrix

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Re: Target retirement funds vs VTSAX
« Reply #4 on: November 20, 2015, 11:39:39 AM »
Thank you for all the great responses. So when I roll over my next 401k into my roll over IRA, can I just designate that to go into a different fund? For my next years Roth, can I just designate that into a different fund as well and leave the current ones the same?

I don't have a huge amount in the target funds, so may just leave them as some of my "safer" funds and moving forward I'll pick 100% stock funds, mostly VTSAX. That way I'll have a little diversification at least.

Shane

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Re: Target retirement funds vs VTSAX
« Reply #5 on: November 20, 2015, 12:30:47 PM »
Thank you for all the great responses. So when I roll over my next 401k into my roll over IRA, can I just designate that to go into a different fund? For my next years Roth, can I just designate that into a different fund as well and leave the current ones the same?

I don't have a huge amount in the target funds, so may just leave them as some of my "safer" funds and moving forward I'll pick 100% stock funds, mostly VTSAX. That way I'll have a little diversification at least.

Sure, no problem choosing different funds for the money from your next rollover and next year's Roth.

mastrr

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Re: Target retirement funds vs VTSAX
« Reply #6 on: November 20, 2015, 06:30:14 PM »
I'm around your age and I have the following allocation.  I have gone back a forth between retirement funds etc. but I have decided on 100% stock allocation for 401k and IRA.

Cash Reserves: 6 months living expenses
Taxable Account: 10k in VBIAX and the rest goes in VTSAX
Roth IRA: 100% in VTSAX
401k: 100% Stocks in a fund that mirrors the S&P 500 (VINIX)

Tjat

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Re: Target retirement funds vs VTSAX
« Reply #7 on: November 20, 2015, 06:31:51 PM »
I don't have a huge amount in the target funds, so may just leave them as some of my "safer" funds and moving forward I'll pick 100% stock funds, mostly VTSAX. That way I'll have a little diversification at least.

This isn't diversification. The Target fund is 54.4% VTSAX. https://personal.vanguard.com/us/funds/snapshot?FundId=0306&FundIntExt=INT#tab=2

If you want diversification, you can buy the other funds in the target fund. But also note that VTSAX is a little bit of every company publicly traded in the US. It's pretty diverse as it is.

 If you're interested, I suggest you read JLCollinsNH stock series http://jlcollinsnh.com/stock-series/ for comprehensive, yet organized, insight into simplified investing..

CheezM

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Re: Target retirement funds vs VTSAX
« Reply #8 on: February 26, 2019, 05:17:17 PM »
Even if you are gun shy about 100% VTSAX, you can set up an asset allocation of VTSAX and VBTLX and do automatic rebalancing. The only "benefits" of a target date fund is that it changes your asset allocaton automatically for an additional fee - something you can do in 5 minutes if you wanted. For early retirees, it can be argued that target date funds are way too conservative (which you apparently realize), so I don't see the point.

Sorry to drag up this old topic, but it's how I found the forum! 

Currently contemplating VTSAX vs the Vanguard Target 2045.  Since it's a retirement fund, that I can't touch until I'm what, 60 or so anyways, is it really too conservative?  I do plan on retiring early, but I can't touch the retirement fund that is currently in the target 2045 fund (which is approximately when I'm 60 years of age).

Is there something totally obvious I'm missing?  Maybe it's just so easy to rebalance the account that it makes no sense to actually do target funds for the extra fee?

MDM

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Re: Target retirement funds vs VTSAX
« Reply #9 on: February 26, 2019, 05:22:52 PM »
Even if you are gun shy about 100% VTSAX, you can set up an asset allocation of VTSAX and VBTLX and do automatic rebalancing. The only "benefits" of a target date fund is that it changes your asset allocaton automatically for an additional fee - something you can do in 5 minutes if you wanted. For early retirees, it can be argued that target date funds are way too conservative (which you apparently realize), so I don't see the point.

Sorry to drag up this old topic, but it's how I found the forum! 

Currently contemplating VTSAX vs the Vanguard Target 2045.  Since it's a retirement fund, that I can't touch until I'm what, 60 or so anyways, is it really too conservative?  I do plan on retiring early, but I can't touch the retirement fund that is currently in the target 2045 fund (which is approximately when I'm 60 years of age).

Is there something totally obvious I'm missing?  Maybe it's just so easy to rebalance the account that it makes no sense to actually do target funds for the extra fee?
You may have a misconception about "can't touch."  See How to withdraw funds from your IRA and 401k without penalty before age 59.5.

Only you can decide your risk tolerance and thus what is or isn't too conservative for an Asset allocation - Bogleheads.

CheezM

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Re: Target retirement funds vs VTSAX
« Reply #10 on: February 27, 2019, 06:16:37 AM »
Even if you are gun shy about 100% VTSAX, you can set up an asset allocation of VTSAX and VBTLX and do automatic rebalancing. The only "benefits" of a target date fund is that it changes your asset allocaton automatically for an additional fee - something you can do in 5 minutes if you wanted. For early retirees, it can be argued that target date funds are way too conservative (which you apparently realize), so I don't see the point.

Sorry to drag up this old topic, but it's how I found the forum! 

Currently contemplating VTSAX vs the Vanguard Target 2045.  Since it's a retirement fund, that I can't touch until I'm what, 60 or so anyways, is it really too conservative?  I do plan on retiring early, but I can't touch the retirement fund that is currently in the target 2045 fund (which is approximately when I'm 60 years of age).

Is there something totally obvious I'm missing?  Maybe it's just so easy to rebalance the account that it makes no sense to actually do target funds for the extra fee?

Well you're definitely missing the (obvious) part about Roth Conversion ladders enabling you to access those retirement funds earlier than 60.  You've got a lot of learning to do.  You're lucky to have found this site.  I'll let you get to that reading :)

My income is too high for a Roth.  I'm assuming if I retire early at say 45 years old, then my income would likely be low enough to do the conversion?  That aside, let's assume I have no interest in touching the funds until 60 or so.  That's part of the planning anyways.  It seems the target funds are probably not worth the extra fee, right?  I can rebalance to add more bonds later on easily myself if I decide to.  Is there any reason to use the target funds in this case?

RWD

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Re: Target retirement funds vs VTSAX
« Reply #11 on: February 27, 2019, 07:45:31 AM »
Even if you are gun shy about 100% VTSAX, you can set up an asset allocation of VTSAX and VBTLX and do automatic rebalancing. The only "benefits" of a target date fund is that it changes your asset allocaton automatically for an additional fee - something you can do in 5 minutes if you wanted. For early retirees, it can be argued that target date funds are way too conservative (which you apparently realize), so I don't see the point.

Sorry to drag up this old topic, but it's how I found the forum! 

Currently contemplating VTSAX vs the Vanguard Target 2045.  Since it's a retirement fund, that I can't touch until I'm what, 60 or so anyways, is it really too conservative?  I do plan on retiring early, but I can't touch the retirement fund that is currently in the target 2045 fund (which is approximately when I'm 60 years of age).

Is there something totally obvious I'm missing?  Maybe it's just so easy to rebalance the account that it makes no sense to actually do target funds for the extra fee?

Well you're definitely missing the (obvious) part about Roth Conversion ladders enabling you to access those retirement funds earlier than 60.  You've got a lot of learning to do.  You're lucky to have found this site.  I'll let you get to that reading :)

My income is too high for a Roth.  I'm assuming if I retire early at say 45 years old, then my income would likely be low enough to do the conversion?  That aside, let's assume I have no interest in touching the funds until 60 or so.  That's part of the planning anyways.  It seems the target funds are probably not worth the extra fee, right?  I can rebalance to add more bonds later on easily myself if I decide to.  Is there any reason to use the target funds in this case?

Two things. Your income doesn't affect whether you can do Roth conversions, it only matters for Roth contributions. When you retire your income should be essentially zero (before conversions).

MDM

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Re: Target retirement funds vs VTSAX
« Reply #12 on: February 27, 2019, 09:29:45 AM »
It seems the target funds are probably not worth the extra fee, right?
That's purely a judgment call on your part.  For some it will be worthwhile, for others not.

Shane

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Re: Target retirement funds vs VTSAX
« Reply #13 on: February 27, 2019, 12:13:11 PM »
My income is too high for a Roth.  I'm assuming if I retire early at say 45 years old, then my income would likely be low enough to do the conversion?  That aside, let's assume I have no interest in touching the funds until 60 or so.  That's part of the planning anyways.  It seems the target funds are probably not worth the extra fee, right?  I can rebalance to add more bonds later on easily myself if I decide to.  Is there any reason to use the target funds in this case?

During the accumulation phase, just go 100% VTSAX or VTI, for maximum growth. No need to rebalance anything. If the market drops while you're saving for retirement, it'll be a great opportunity to buy shares at lower prices. Just keep plowing everything into the market. If it helps you sleep better at night, shortly before you retire, you could put 5 or 10 years of spending into VBTLX or BND, so when the market tanks, during your retirement, you'll be able to spend money from your bonds, instead of having to sell off shares of VTSAX at less than you paid for them.

CheezM

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Re: Target retirement funds vs VTSAX
« Reply #14 on: February 27, 2019, 12:59:29 PM »
My income is too high for a Roth.  I'm assuming if I retire early at say 45 years old, then my income would likely be low enough to do the conversion?  That aside, let's assume I have no interest in touching the funds until 60 or so.  That's part of the planning anyways.  It seems the target funds are probably not worth the extra fee, right?  I can rebalance to add more bonds later on easily myself if I decide to.  Is there any reason to use the target funds in this case?

During the accumulation phase, just go 100% VTSAX or VTI, for maximum growth. No need to rebalance anything. If the market drops while you're saving for retirement, it'll be a great opportunity to buy shares at lower prices. Just keep plowing everything into the market. If it helps you sleep better at night, shortly before you retire, you could put 5 or 10 years of spending into VBTLX or BND, so when the market tanks, during your retirement, you'll be able to spend money from your bonds, instead of having to sell off shares of VTSAX at less than you paid for them.

Thanks.  This is basically what I was leaning towards doing.  I'm comfortable with 100% stocks.