Author Topic: Vanguard managed payout fund?  (Read 1488 times)

Miss Prim

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Vanguard managed payout fund?
« on: August 24, 2015, 04:24:48 PM »
Hi all.  I was surfing around on the vanguard site because I am going to transfer my 403b from my employee plan to Vanguard and I happened across a fund called Vanguard managed payout fund.  I wonder if anyone has heard of this or would recommend it.  I just retired in April and have drawn less than 2% of my total portfolio so far this year to keep us with some extra money.  Husband is now collecting SS at 66.  I am close to 62 and I want to wait until at least 65 to collect, but we do need to replace some of my previous income to the tune of about $1000.00/ month.  We have almost 1.3 M.  and it looks like if I put $300,000 in this fund I would receive a payout of $915 a month. 

Any thoughts on this?  I am trying to simplify my portfolio between Vanguard and Fidelity using the Bogleheads ideas on allocation and what funds to invest in.  Right now I have a mess going on because my husband inherited some tax-deferred and some non tax-deferred investments from his mom and they are mostly in blue chips and some mutual funds.

Thanks for any help you can give this not so early but mustachian retiree!

                                                                                                               Miss Prim


Argyle

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Re: Vanguard managed payout fund?
« Reply #1 on: August 24, 2015, 06:18:09 PM »
Checking the website, the expenses for the managed payout fund are 0.42%, as opposed to 0.05% for their index funds.  That's $370 more for every $100,000 you have invested, or $1110 per year for in fees for your $300,000.

I guess the advantage over an index fund is that it's more conservative it certainly has lower gains that an index fund over the last decade, which I imagine will theoretically be balanced out by smaller losses. 

But note that the fund aims for a 4% return, but doesn't guarantee a 4% return.  So when you say you "would" receive a payout of $915 per month, what that means is "assuming the stock market cooperates."

If you go to the fund page and click on "Price and Performance," and then go over to the "Select a Benchmark" tab and select S&P 500 Index, you get a chart that compares this fund to the S&P 500.  What the chart shows is that the fund went as low as the S&P during the crash in '08, but lagged significantly behind the highs when highs were reached, for instance lately.  I have to say that doesn't look very promising to me.

I think it depends on your risk tolerance.  To average $1000 a month, what you need is fairly robust returns, and also to save for leaner times when you get above-average returns.  If you have the discipline to do that yourself, I think an index fund is a better bet, with the bonus that you save one month's $1000 on fees alone every year.

Miss Prim

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Re: Vanguard managed payout fund?
« Reply #2 on: August 25, 2015, 06:24:28 AM »
Thanks so much Argyle for explaining it to me in detail!  I appreciate you taking the time to help me.  I guess what I liked about the fund was that they would send you a payout every month, like a paycheck.  I guess I can do this myself, which is what I have been doing by selling some of my underperforming funds, like bonds.  I really like the simplicity of the 3 or 4 fund portfolios that I have read about.  I am going to try to do that between Vanguard and Fidelity, where I already have accounts. 

I am trying to make things as simple as possible.  If something happens to me, my husband would be lost because he does not handle any of the finances.  I am trying to get him more involved, and it has helped somewhat when I put everything on mint.com so he can see the whole picture.  That is how I convinced him we could retire!

                                                                                                       Miss Prim