Target Retirement fund, Vanguard 500, or both?

[nalto]

I've decided to open a Roth at Vanguard, and I'm debating which option I should go with...thoughts?

[Deleted]

What other investments do you have?

[midjd]

What is the expense ratio on the target fund? I have one through Schwab that is only about 0.11%, and I'm happy with its performance so far. Some that I've seen have up to 1% expense ratios... for that money, you're better off handpicking the lower expense funds and rebalancing every year or so.

[jd2005]

I have a target fund and an index fund. I stopped contributing to the Target fund after I discovered it pretty much tracked the index fund less the higher expense ratio.

[nalto]

Jun 20, 2011 11:58:43 GMT -5 ArchietheDragon said:

What other investments do you have?

None at the moment. Just a "pension" plan at work. I can't contribute to it, and they put in 6% of my salary. I can, however, manage it.

[jd2005]

This message has been deleted.

Double post

[nalto]

This message has been deleted.

Double post.

[Deleted]

Jun 20, 2011 12:24:14 GMT -5 nalto said:

Jun 20, 2011 11:58:43 GMT -5 ArchietheDragon said:

What other investments do you have?

None at the moment. Just a "pension" plan at work. I can't contribute to it, and they put in 6% of my salary. I can, however, manage it.

Tough call. One one hand, I would say that you should go with the target fund to get the additional diversification into international and bond markets, but then again a pension is essentially an income stream from a fixed income (ie. bond) fund.


I think I would still go with the target.

[Deleted]

Target.

Vanguard is the low cost leader. Selecting a target retirement fund gives you an age-appropriate diversified portfolio.

Vanguard expenses consistently beat industry average = personal.vanguard.com/us/funds/vanguard/TargetRetirementList#targetAnchor

Not meant to be a knock on Schwab, but their listed fees are significantly higher than Vanguard and industry average = www.schwab.com/public/schwab/investment_products/mutual_funds/portfolio_solutions/target_funds

And it is true the expenses for a target fund are higher than if you purchase individual index funds. The small premium pays for the added service of automatic rebalancing, and changing asset allocation as you grow older. Both easily trump the index funds basket unless you choose to take an active role in asset allocation maintenance.

[nalto]

Archie, sorry. The pension isn't a true pension. It's like almost any other retirement account, except I can't add to it. Right now, it sits in a T. Rowe Price Target account, but I have the option of allocating funds almost anywhere I'd like (from the funds available.)

[Plain Old Petunia]

Vanguard does not charge ANY additional fees on their Target Retirement funds. You pay ONLY the expense ratios of the underlying funds.

<< And it is true the expenses for a target fund are higher than if you purchase individual index funds. >>

This is only true if you can qualify for admiral shares, and the OP cannot.

<< I've decided to open a Roth at Vanguard, and I'm debating which option I should go with...thoughts? >>

Definately Target Retirement. The S&P 500 is well represented in the TR funds, plus you will have exposure to mid caps, small caps, international, and bonds.

[Deleted]

I have a Vanguard target fund, and I've been happy with it . . . a lot happier than I ever was with an actively managed fund through Merrill Lynch's Mutual Funds Advisory program.

I did do some reading before I made the switch, though, and one suggestion that I did end up following was to push your retirement date out by five years. That keeps the fund from going too conservative when you are my age (57). I need my retirement assets to last 30+ years if possible because I have real longevity in my family. My paternal grandmother lived to be over 100, and her oldest daughter is not far behind at 98.

[Plain Old Petunia]

From the prospectus, emphasis mine:

The Funds’ trustees believe that the offsets should be sufficient to cover most, if not all, of the direct expenses incurred by the Funds. As a result, each Fund is expected to operate at a very low or zero direct expense ratio. Since their inceptions, the Funds, infact, have incurred no direct net expenses. Although the Target Retirement Funds are not expected to incur any net expenses directly, the Funds’ shareholders indirectly
bear the expenses of the underlying Vanguard funds.

[nalto]

Stupid question. Paying expense ratios, fees, etc, does all that get pulled from my "account" or do I actually have to pay?

[Deleted]

It's reflected in the yield.

[Small Biz Owner]

Stupid question. Paying expense ratios, fees, etc, does all that get pulled from my "account" or do I actually have to pay?

If the Target account loses money you will be incurring the loss and paying the higher fees. A double whammy.

[Deleted]

So what are you invested in the T. Rowe Price funds? I suggest looking at your investments holistically and invest accordingly. Are you better off with the SP 500 in T. Rowe Price and a earlier (or same year) Target fund to compensate for the heavier equity side. Or are the bond fund options really good in T. Rowe and therefore you are better off with an SP 500 at Vanguard or really far out Target retirement fund?

You'll need to run your own numbers to see how much is being saved in your retirement fund vs what you can save and contribute. Morningstar.com is a wonderful source to compare fund costs and investment choices.

[nalto]

Jun 21, 2011 13:13:23 GMT -5 @bonnap said:

So what are you invested in the T. Rowe Price funds? I suggest looking at your investments holistically and invest accordingly. Are you better off with the SP 500 in T. Rowe Price and a earlier (or same year) Target fund to compensate for the heavier equity side. Or are the bond fund options really good in T. Rowe and therefore you are better off with an SP 500 at Vanguard or really far out Target retirement fund?

You'll need to run your own numbers to see how much is being saved in your retirement fund vs what you can save and contribute. Morningstar.com is a wonderful source to compare fund costs and investment choices.

The T Rowe Target is for my "pension" plan. I could change that to the Vanguard 500 if I want. My Roth was the one I was curious about. I went Target with Vanguard for my Roth, and I may change the "pension" from Target to V. 500, but I'm still undecided.

And I suppose that leads me to question #2: With free money (literally,) should I stick with the target fund, or go with the Vanguard 500 Index?

[nalto]

Jun 21, 2011 13:08:05 GMT -5 @bonnap said:

It's reflected in the yield.

Thank you