[USER]

I’ve been reading posts in this forum on Target Date Funds and trying to figure out what to do with mine: I am 57, $120k salary, single-parent to a 9 year-old. About 7 years ago, at the advice of a fee-for-service financial advisor, I combined various retirement accounts from different jobs into Vanguard Target Retirement 2035 (VTTHX). Current balance is $713k. I also have $50k in Vanguard Vanguard Target Retirement 2050 (VFIFX).

I have $370k in my Vanguard Brokerage Account, of which $88k is in VTSAX and $66k in VTI. The remainder is a hodgepodge of small cap ($47k), bond index/ETF ($14k), Emerging Markets ETF (VWO) ($27k), Extended Market ETF (VXF), and a few others. I have an additional $100k in 401k to rollover somewhere. I have $100k in my son’s 529 account.

For additional context, I live in HCOL area, San Francisco (I rent, $3400/month) and own a house in the East Bay (El Cerrito, CA) that tenants rent for $3135/month. Mortgage balance is $141k and current home value is $913k.

I plan to work for 8 more years, and will retire to LCOL area. I am only staying in San Francisco because my 81 year-old mother lives here and I want to live near her.

In what I’m reading here, many people are against Target Retirement Funds, for reasons I generally agree with. My question: Is it a good idea to sell my IRA Target Date funds, or part of them? I don’t understand if that’s a bad idea as I’ve had them for about 8 years, and market is currently high as a time to buy other funds with higher yields.

Returns seem quite low for the Vanguard Target Date 2035 (VTTHX), where most of my retirement funds are. My risk tolerance is generally high, but I’m also 57, so want to get an asset allocation that is appropriate. The other consideration is that I will likely return to a job with the federal government in a few months, so I will again have access to TSP, and could do a partial rollover to TSP as well as ongoing contributions. Thank you in advance!

[Jarriel]

There’s nothing wrong with index target date retirement funds. The additional expense ratio for the automatic rebalancing and adjusting your glide path is negligible.

Your portfolios are fine. Don’t let this group add more complexity to your life.

[J.C.]

I’ve recently began losing my enthusiasm for TDFs, but especially in non-retirement accounts. They can throw off considerable capital gains (like when they rebalance) which can lead to significant tax obligation even if you don’t withdraw those gains. Never hold a TDF outside of a retirement account.

Now, as to their general performance, I’m not so sure that they are worth the extra fees.

You can just purchase a couple of low cost, highly diversified, passively managed index funds like VTSAX (Total Stock Market), or VFIAX (S&P 500), and an international fund like VTIAX, then counter-balance it with VBTLX (Total Bond Fund) or maybe a TIPs fund like VAIPX for the added inflation protection. And then just rebalance periodically (annually?)

or use guard rails (like I do) of 5% move in either direction to rebalance back to your desired Asset Allocation. And save the TDF fees. Your call.

Don’t miss: Should I purchase VMFXX through my taxable account, Roth IRA, traditional IRA?

[Tony]

Personally speaking, the only two funds I plan on owning for the rest of my life are VTSAX and VBTLX. The percentages of each will depend on my age and risk tolerance.

I read “The Simple Path to Wealth”, and I’m not going back to having many funds ever again.

[Author]

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