Invest in CDs or add to current Target Retirement Fund?

Investing
1

Should I rollover my CD into another CD for about 5.35% for 14 months or withdraw the money and put it into a current Vanguard Target Retirement Fund assuming I will withdraw same amount from Vanguard account in 14 months. Seems since I will be making more interest on the Vanguard account that would be best choice. Am I missing any hidden costs or consequences? I am 75 and retired.

2

With a 14-month window you should put your money in cash or cash equivalent vehicles. The risk with a Target Retirement Fund is loss of value over that short time period. For example, the Vanguard Target Retirement 2020 fund total return was a negative 14% in 2022 and negative 27% in 2008.

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3

Thank you!

4

Why bother tying your money up in a CD just to have it mature right when interest rates will probably tank? High yield savings accounts almost rival this rate. My Vanguard money market account is currently rivaling it also. A Target Fund adjusts its holdings based on your age. In your 70’s it will be heavily slanted towards funds. I also wonder if a Target fund would be an appropriate investment outside a retirement account. Have you considered a short term index fund also?

5

I’ve seen a lot of posts like this, and really what it comes down to is this, and I mean no disrespect, but… we don’t have enough information to answer your question.

What I’d really like to ask you as a follow-up question is this - if you hold back some money as CDs or cash or whatever, you are essentially making your “portfolio of everything you own on earth” a wee bit more conservative. Does that mean you think your current portfolio is too aggressive? Because that’s your action speaking louder than words.

So the real questions are, do you have a retirement cash flow plan which accounts for inflation and taxes, and do you have an asset allocation that supports that plan to a high degree of safety?

You see, if you had a plan you believed in, you wouldn’t be out here asking random strangers what to do. You’d just execute your plan, your portfolio policy. End of story.

On my good days, that’s what I do. On my bad days, I fret and worry along with everyone else… but I still stick to my plan.

I know you just wanted a simple answer to a simple question. But in life… the answers to simple questions sometimes aren’t simple.

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