Roth IRA and Vanguard target funds (dump, 2015, separate, years)

[saralvr]

We can put the max in a 2016 ROTH IRA. I thought I'd go with Vanguard, where we have some money in Index 500 and Wellsley. The bulk of our 401K money, now traditional IRA, is with Fidelity.

Any info on the retirement date funds you want to share with me? I was thinking of the 50/50 plan, right in the middle. It's a 2015 target date fund. I know it's not a lot of money, but appreciate any assistance. Thank you.

BTW, no, we don't plan on touching this for a long time.

[SouthernSusana]

Everything I read when I was trying to make this decision said one problem with target funds is that they tend to go too conservative too soon. At age 65, you can easily need your money to last 20-25 more years or so.

So I followed the advice and went with a later target fund. In my case it was 2025 rather than 2020. I've been happy even though it hasn't had quite the ups of recent market upturns.

I'm not sure what a 50/50 fund is unless you are talking about two separate funds. You don't choose the proportion of stocks vs. bonds in a target fund; the target fund does. At least that is how it has operated for me.

[Aredhel]

If you're not planning on touching the money for a long time, I'd go with something more stock-heavy than 50:50.

[jnojr]

Originally Posted by SouthernSusana

Everything I read when I was trying to make this decision said one problem with target funds is that they tend to go too conservative too soon.

Exactly.

But even a later-dated target fund can have a very conservative "glide path" (the rate at which equities are exchanged for bonds or other, safer but lower-yielding investments). My retirement accounts are in targets because I needed to set something up fast, but I really need to sit down and reallocate. I've got a long ways to go

[mathjak107]

yes , they do not lend themselves well to dollar cost averaging in yet that is how they are used .

markets are up 2/3's of the time and down 1/3 so over time you are buying less and less shares at the same time the glide path is cutting allocations to stock . it can be far more conservative than designed .

besides , i would never use anything that strictly went by age and not the world around us .

would you want to be mostly put in to bonds in retirement if we are in a long time trend of rising rates ?

i wouldn't .

[saralvr]

Thank you for responding. I have been trying to figure where to put this money. We don't plan on touching it and will look into being less conservative. Mathjak, appreciate you explaining why target funds aren't a smart investment in this situation.

[dcfas]

You have domestic equities and bonds already. These Vanguard target funds do have a healthy int'l exposure; vthrx has 28.6% Total Int'l Stock Index and 8.2% Total Int'l Bond. But they are designed to be an all in one basket. I would consider diversifying a bit more depending on your needs and timeline. Some folks want to hold when they reach retirement. I think with that perspective the target funds are a decent middle ground. Mathjak has pointed out in other posts their drawbacks, the main one being that they are completely oblivious to market conditions and will dump equities for bonds at possibly the worst times, for example. But many folks will not or cannot react to the market. In fact, for many that would be disasterous. These funds might lag a bit at times, but they are inexpensive and a reasonable alternative, imho.
DC