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  • Asset Allocation Change

    I have decided that I would like a different asset allocation than what is currently in my Vanguard target date funds. I started my investing several years ago and my investments are all in my Vanguard Roth IRAs and my TSP (military 401(k) like account).

    1. Could someone confirm for me how to go about exchanging these funds, particularly at Vanguard? Do I just go to my Roth IRA account -- then exchange funds -- then choose my TDF fund -- then sell all shares -- then choose the funds that I desire in the percentages I desire?

    2. Could anyone confirm that in a tax-advantaged account like my Roth and TSP that there should be no fees/taxes associated with such transactions? I know it would be different if I had money also in a taxable account.

    Thank you for any assistance to a fellow newbie!


  • #2
    I can't vouch for your TSP account, but at Vanguard it's very simple to move your money out of the target-date fund and into the funds you wish to own in its place.. Just choose the option "exchange" to move the money out of the target date fund and into the funds you prefer.

    And no, there are no tax implications for trading inside a retirement account. That would only happen if you actually withdrew the money from the account (which is a mistake some people do make when they try to move a retirement account from one brokerage to another).

    Just curious: what is it about the asset allocation in the Target Date Fund that you don't like, and what funds would you prefer to have the money in?

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    • #3
      I am not against my Target Date Fund at all but after looking at the "150 portfolios better than yours" and at the Bogleheads asset allocation stuff I am concerned that my stock:bond ratio is too high. I am currently in the 2050 fund and my current ratio 91% stock for mine and my wife's rIRA. My TSP TDF is at 87% stock. It has done well and I didn't freak out when things happened this March and sell but I was considering being somewhat less aggressive. The expense ratio is also higher, although still low.

      Do you know if you can have these same target Date Funds in a taxable account as well? My understanding is that b/c of the buying/selling that occurs within it that it would not be good to have in a taxable account either way. So overall, I just wanted to be able to set some percentages that I felt a bit more comfortable with, have slightly more control, lower the expense ratio, and help myself plan my taxable account investments. Does that make sense? Still very much a newbie.

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      • #4
        Originally posted by C_Rod View Post
        I am not against my Target Date Fund at all but after looking at the "150 portfolios better than yours" and at the Bogleheads asset allocation stuff I am concerned that my stock:bond ratio is too high. I am currently in the 2050 fund and my current ratio 91% stock for mine and my wife's rIRA. My TSP TDF is at 87% stock. It has done well and I didn't freak out when things happened this March and sell but I was considering being somewhat less aggressive. The expense ratio is also higher, although still low.

        Do you know if you can have these same target Date Funds in a taxable account as well? My understanding is that b/c of the buying/selling that occurs within it that it would not be good to have in a taxable account either way. So overall, I just wanted to be able to set some percentages that I felt a bit more comfortable with, have slightly more control, lower the expense ratio, and help myself plan my taxable account investments. Does that make sense? Still very much a newbie.
        Sure, it makes sense. But if you are young, I'd caution you about lowering your stock:bond ratio by too much. If you're in your 30s, I'd suggest not going any lower than 70:30, and higher is better. Make bigger gains while you're still young enough to bounce back from a market slump! Dial back when you hit your 50s.

        You can hold Target Date funds in a taxable account, but for all the reasons you noted they are better in a retirement account because they are not designed for tax efficiency.

        Comment


        • #5
          You could shift target date funds to an earlier year to suit your desired asset allocation. Check out the composition of the funds. Perhaps 2040 or 2035 would be more to your liking.

          Comment


          • #6
            Originally posted by C_Rod View Post
            I have decided that I would like a different asset allocation than what is currently in my Vanguard target date funds. I started my investing several years ago and my investments are all in my Vanguard Roth IRAs and my TSP (military 401(k) like account).

            1. Could someone confirm for me how to go about exchanging these funds, particularly at Vanguard? Do I just go to my Roth IRA account -- then exchange funds -- then choose my TDF fund -- then sell all shares -- then choose the funds that I desire in the percentages I desire?
            -- yup. its just a few clicks.

            2. Could anyone confirm that in a tax-advantaged account like my Roth and TSP that there should be no fees/taxes associated with such transactions? I know it would be different if I had money also in a taxable account.
            -- fees are independent on broker.
            -- workplace plan usually not.
            -- no tax consequences in protected accounts except TLH.


            Thank you for any assistance to a fellow newbie!
            what is your new AA?

            Comment


            • #7
              Originally posted by Peds View Post

              what is your new AA?
              Between my Roth IRA, my wife's IRA, and my TSP all in Target Date funds

              - 87% stock: 54% of total investments in Total US Stock Index funds; 33% of total investments in total international index funds
              - 9% bonds: 7% of total investments in US bonds; 2% of total investments in international bonds
              - 4% G-fund of TSP (short-term US treasury securities specially issued to the TSP w/o credit risk)

              Comment


              • #8
                If you are 30 years from retirement I don’t see anything wrong with a 90/10 equity to bond ratio. I remember listening to a WCI podcast (maybe the Ferry vs Merriman?) where someone question why even have bonds if you are decades away from retirement.

                Underperforming over decades by being too conservative isn’t good either.

                Comment


                • #9
                  Originally posted by Peds View Post

                  what is your new AA?
                  Sorry...I initially read your question as my current asset allocation. I was considering the 3 fund plus 1 portfolio on the "150 portfolios better than yours" list with slight adjustment of percentages

                  40% Vanguard Total Stock Market Fund
                  30% Vanguard Total International Stock Market Fund
                  10% Vanguard REIT Index Fund
                  20% Vanguard Total Bond Market Fund

                  Comment


                  • #10
                    Originally posted by C_Rod View Post

                    Sorry...I initially read your question as my current asset allocation. I was considering the 3 fund plus 1 portfolio on the "150 portfolios better than yours" list with slight adjustment of percentages

                    40% Vanguard Total Stock Market Fund
                    30% Vanguard Total International Stock Market Fund
                    10% Vanguard REIT Index Fund
                    20% Vanguard Total Bond Market Fund
                    Concerned your stock:bond ratio is too high but planning to increase your bond %? Maybe I am misreading

                    Comment

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