No. of Recommendations: 0
I am currently thinking of moving the funds to a Vanguard Target Retirement account. However, since I am, IMHO, behind the curve, perhaps I should be a bit more aggresive and go with the 30 yr old's account (2035) instead of the 40 yr old's (2025). Thoughts?

Are your only investments the previous employee's retirement plans? What flavor are they? (Not all plans are 401(k) or 403(b) plans.)

Assuming you can roll the funds over to a "Rollover IRA" and that represents your only investments at this time, a target retirement fund could make a decent one-fund portfolio because it is a fund of funds and it doesn't add any expenses on top of the underlying expenses.

This is what Vanguard says is the composition of the 2025 and 2035 funds as of March 31, 2004:

Vanguard Target Vanguard Target
Retirement 2025 Retirement 2035
45.2% 60.2% Vanguard Total Stock Market
39.9% 19.9% Vanguard Total Bond Market
8.2% 10.9% Vanguard European Stock Index
3.8% 5.0% Vanguard Pacific Stock Index

(The percentages don't add up to 100%--some of the assets are in short-term instruments and cash.)

If 20% bonds fits your investment strategy better than 40% bonds, the Vanguard Target Retirement 2035 Fund may be a better fit for you than the Target Retirement 2025 Fund.. Over time the bond holdings will increase and the stock holdings will decrease.

The target retirement funds are aimed to be a single lifetime fund for those who want simple portfolios and don't want to bother with rebalancing or with changing one's allocation as one gets closer to retirement--an attempt to be an "invest it and forget it" type of portfolio. The year in the fund's name is when one intends to retire. However, by using 2035 instead of 2025, you are taking a more aggressive stance due to your perceived need to take on more risk, wich I consider an acceptable tradeoff, as long as you don't lose sleep over the volatility of your portfolio.

If you don't like the particular funds the target retirement funds invest in, the next option would be to invest in the specific desired funds yourself rather than use the fund of funds. But there is nothing wrong with a target retirement fund if all your investments are in a tax-favored account and one of the target retirement funds meets your needs.

(Why are the target retirement funds a poor choice if you have both taxable and tax-favored accounts? Because it is more efficient to put the tax inefficient funds in the tax-favored accounts to minimize taxes, so one's tax-favored accounts would typically be heavy in stock index funds and possibly tax-managed funds, while the tax-favored accounts would be heavy in bond funds and funds that tend to generate lots of taxable distributions. Sometimes too much money complicates life.) 8)
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.