You can buy the lifestrategy fund and set up an automatic withdrawal plan. That accomplishes the same thing with much lower fees. With the automatic withdrawal plan you can also set the monthly distribution to what you need instead of a 4% default.
But telling someone to buy a lifestrategy fund and set up an automatic plan to withdraw "what they need" doesn't seem as safe as the managed payout fund. The payout fund determines what you get, inflating as you go etc, in the same manners we all here generally use to determine what we can draw that will last us till our deaths.
I agree it probably gets too complicated with mixed accounts to think you can do something this simple
Replying to the bold: It doesn't adjust the payouts for inflation and it doesn't use the same 4% rule we talk about here.
4% rule: Draw 4% in year one and add inflation each year. Example: 1 million dollar portfolio. Draw $40,000 in year 1, $40,800 in year two, $41,616 in year three, etc. Since the portfolio will fluctuate in value, sometimes growing more than 4% per year, and sometimes less(or even negative returns) there will be years you are drawing less than 4% and years you are drawing more than 4%. The idea is that your cash flows remain steady while you are drawing off a portfolio that is fluctuating. A lot of research found the ideal withdrawal rate to achieve this without running out of money over 30 years was 4%.
Managed payout fund: Pays 4% of the
current balance every year. If the portfolio rose perfectly with inflation each year that would be fine, but it doesn't do that. After a drop like 2008 your income would drop 28.79%! That's how much the fund was down in 2008. Using our example you would get $40,000 in year one, and $28,484 in year two. That's a pretty remarkable difference in income.
Now you can buy a Lifestrategy moderate growth fund and set up an automatic withdrawal plan for 4% in year one, and then just adjust it for inflation each January. This is very low maintenance, and lower cost.
Again, keep taxes in mind. You wouldn't want to put the Lifestrategy or the Managed Payout fund in a taxable account. Ideally, you would build a tax efficient portfolio, but that might not be as low maintenance as you want especially if there are existing holdings with capital gains you need to work around. If you wanted to keep it low maintenance and tax efficient the potential tax savings would probably make it worth it to just have Vanguard do it for you instead of using the Managed payout fund.
Managed payout fund: 0.34%.
Vanguard's portfolio management: 0.3%, and if they are using index funds the fund costs will likely be between 0.05 and 0.10%. All in should be in the 0.35 to 0.4% range.
I don't normally suggest using an advisor, but in this case the cost difference is negligible if you are already looking at the managed payout fund.