Have about $100,000 to invest indefinitely. Just want to leave it to my sons as beneficiaries. Probably a 15 year timeframe. I just want to invest and leave it alone. Should I just do another Target Retirement Fund. Want low risk with highest return. Their CD’s are confusing.
15 year time frame, pretty sure they have an S&P 500 index fund, not sure of the exact name, I would go with that. Something more conservative, I use their Wellington Fund. It’s averaged about 8% annually since 1929.
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Target Retirement Funds are tax inefficient and should not be used in a non-retirement account. Vanguard’s Total Stock Market or S&P 500 index ETF/mutual fund are tax efficient.
Clarify please. I’m serious. I have some of those.
Target Date funds can generate capital gains when the fund manager sells investments with embedded capital gains.
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How do I change my Target Retirement Funds into the S&P 500 or the Total Stock Market? Also, of the two, which is safest and highest return? thanks, I am a novice at this
For performance, just google each one. You will be able to see a ton of info, past performance, volitivity, etc. You should be able to make the change either online or with a phone call. Not complicated.
As is the case with most of us…
You have a current Target Retirement Fund and also $100,000 in cash for your heirs.
The differences in performance between Vanguard’s Total Stock Market and S&P 500 funds are minimal. The Vanguard’s TSM is more popular.
Will you have significant amount of capital gains if you sell all of your taxable account Target Retirement Fund? If so, there might be additional considerations.
Is the $$ in a brokerage account, IRA account or Roth? If you’re leaving it to your sons, the tax treatment will be different for each option. I learned this from money I inherited from my dad.
For my own investments, I’m starting to gradually convert my traditional IRA $$ to a Roth conversion, for better tax treatment. My retirement tax bracket in retirement is not lower than when I was working. I suspect that the conventional wisdom about lower tax brackets in retirment is for high-income earners while working vs retirement.
Thanks for all the feedback. I exchanged my holdings in my rollover account for VTSAX as the return is better. Not sure how to figure out if I’ll have capital gains if I exchange Target Retirement Fund for S&P 500 but thinking of doing so. Again, you have all been very helpful and I did learn how to navigate buy and sell and exchanging plus automatic RMD setup.
Do you pay capital gains when you exchange one fund for another within Vanguard?
You’re right. In addition, I tried to exchange Target Retirement Fund for VTSAX and they asked for the cost basis so I assume I would have to pay capital gains tax.
You must also consider expense ratios vs. returns over time. Also, the US stock market may be currently outperforming international funds, but that is not always the case. Be sure you are diversified in order to account for market changes. The target funds, inside a retirement account of course, do that for you, albeit at a lower return. If you are a novice and aren’t monitoring and readjusting your holdings periodically (bonds, domestic funds, international funds), you may be better off sticking to a balanced fund or enrolling in personal advisor or digital advisor services. Most index funds are pretty hands off anyway. Do you also have holdings that are in a taxable account? As far as their CD’s go, some only pay simple interest instead of compounding so be careful you compare apples to apples. Vanguard has a dedicated phone number for CD investing.
Very helpful. Thank you.
Stay away from Vanguard, BlackRock, and State Street. These are the ringleaders of ESG on Wall Street. Doesn’t matter if your funds are ESG are not. These firms push such policies in firms they own in any of their funds.
Vanguard withdrew from the international Net Zero Asset Managers Initiative last December. Vanguard’s statement An update on our engagement with NZAM | Vanguard
Did they also withdraw their support for other parts of ESG, like preferential hiring by race?
I do not know what Vanguard’s hiring policy is. My understanding is that the term ESG (Environmental, Social and Governance) refers only to investing decisions.
Big Downside is…Vanguard owns the stocks in your funds and votes for BODs…you don’t have voting power on their funds…
Makes Vanguard, State Street Capital and Blackrock the 3 most powerful and controlling stockholders.