3 Simple Ways to Invest All of Your Money After You Retire

so you've probably heard of a Target date retirement mutual fund it's a single fund that you can invest in to save for retirement you pick it based on the year you think you'll retire in fact they'll even put the year in the name of the fund so you know which one to pick and then you're done they make it a little bit more conservative as you get closer and closer to retirement by shifting some of the stock investments into bonds they do that for you and you can Simply Save into that one fund and keep doing that until you're ready to retire but then what happens now that you're in retirement are there single mutual funds or ETFs that you can use to invest all of your retirement assets once you retire well that's what we're going to cover in this video I'm going to give you some ideas of some funds to consider and and types of funds that you could use in retirement Just One Fund to manage all of your money and that's true whether you've got a 100,000 a million or 10 million so that's what we're going to do in today's video and so let's get started the first one I want to show you this actually comes from Vanguard now we have to make sure we get the terminology right Vanguard calls these life strategy funds the term life strategy is just a branding or marketing term that Vanguard has come up with to describe these mutual funds that I'm going to show you in the industry these would be called asset allocation funds and the idea behind them is they're going to invest in both stocks and bonds in a certain allocation meaning a certain percentage of each depending on how conservative you'd like to be or how aggressive you want to be and companies fund companies that offer these asset allocation funds uh usually offer four or five different allocations that you can pick from in the case of Life strategy funds we can come down here we see four of them and you can see the allocation over here so for this one life strategy income fund if you you can put all of your money in this F fund or every dollar you put in here Vanguard will divide it up put 20% of it in stocks and 80% in bonds and of course then if you say well that's a little too conservative well you just can come up to the next one they call it the life strategy conservative growth fund you get 40% in stocks 60% in bonds and then they've got uh moderate growth which is 60% stocks 40% bonds that might be a very popular one for folks in retirement and life strategy growth fund this is the most aggressive they get 80% stocks 20% bonds now the thing I want to point out is These funds aren't specifically designed for people in retirement someone that's saving for retirement or perhaps saving for something else over a long period of time could use these funds as well but I think if if they've got the target allocation you're looking for or at least something close these would be ideal funds to consider once you're in retirement now keep in mind mind unlike a Target date retirement fund the asset allocation here the division between how much goes in stocks and how much goes in bonds doesn't change over time it stays the same so if you invest for example in this moderate growth fund it's going to be 60% stocks 40% bonds today tomorrow and 10 years from now we can take a look at a specific example and I'll use the moderate growth fund as an example we can see it's only 13 basis points that's 0.13% very inexpensive you need a $3,000 minimum investment and we can actually come down to portfolio composition and you can see what what Vanguard does is if you invest in this fund they take your money and split it between four of their other uh funds the Vanguard Total stock market index fund gets 35.8% uh their Total Bond Fund gets about 28% they've got a total International stock fund that's around 24% and they put some in international bond 12 close to 12 a half uh percent and now the expense ratio is Allin so they don't charge you separately for the expense ratios for these funds it's thir 13 basis points total and uh so a lowc cost great fund uh I will point out one thing it doesn't invest in are tips so if tips are something that's important to you I suppose you could as an example uh put perhaps the majority of your money in this fund and then some amount in in a tips fund if you wanted to uh but the idea behind a fund like a life strategy is you're getting a a a good fund that uh you're simplifying your Investments what you're giving up is some level of control so this is an a 6040 stock allocation with these specific funds used to implement the investment strategy and you're sort of that's your choice you don't have options you can't say well I want 65% stocks and 35% bonds so you're giving up up some level of control in exchange for Simplicity and by the way that's true with all of the funds we're going to look at and that's true generally there there's a sort of a you know Simplicity and control you can't have them both so you know that's something you'll have to decide for yourself okay now before we leave Vanguard I want to show you two other options that are similar to life strategy funds the first is called Wellington and the second one is called Welsley these are two of the oldest mutual funds still in existence today across any mutual fund company I will tell you these are both actively managed in fact you can see it right here management style active which means there are people behind the scenes deciding what stocks and bonds to to to to invest in for these funds that being said unlike most actively managed funds these are incredibly inexpensive for an actively managed fund this one is just 17 basis points uh this is Admiral shares it does require a $50,000 uh minimum investment this particular fund we can go down to composition is roughly 65% stocks and and 35% bonds and then Wellington is just the opposite if we go back to portfolio composition it's uh roughly 35% stocks 65% bonds or's some short-term reserves as well I'm not one to normally recommend actively managed funds or to speak highly of them there are exceptions these two have been known to perform extremely well over a very very long period of time and so I mention them to you as options again you're getting Simplicity One Fund but you're giving up some level of control you have to accept what they're investing in and the specific asset allocation that they offer which may or may not be uh what you're looking for but I I think these are good funds to at least consider again I'll link to all of this below the video now now I want to move away from Vanguard for a minute uh and I want to come to ey shares by Black Rock now notice they they call this asset allocation Solutions which we talked about asset allocation funds and uh they offer them too very similar to the life strategy funds we saw uh at Vanguard and you can see them here and they've got two different kinds the one on the the set on the right are ESG aware um so if that's something it's important to you you can look at those I'm going to focus on on their just what they call Core allocation funds here on the left and very similar to Vanguard they offer uh four of them and these are the tickers now these are ETFs vanguards are mutual funds as a practical matter I think particularly we're talking about retirement accounts like an IRA I don't see a significant difference there can be some tax advantages uh to some ETFs over some mutual funds I think in this case uh particularly inside an IRA probably not a significant uh difference but you'll notice these are uh relatively inexpensive at 15 basis points and if we scroll down we can see what here we go we can see what the allocations are so just like Vanguard for example ticker AO they offer 60% stocks 40% bonds but of course you've got other choices they've got 8020 4060 and 3070 and you can come down here and see specifically what they're investing in now Vanguard used four funds uh I shares uses seven uh the blue and light blue are US Stocks the sort of purple and pink and lavender are international stocks and the green are are bonds uh both International and us and so depending on which fund you would pick you can see exactly what they're investing in uh extremely straightforward again you'd have to pick an asset allocation that they're offering and if it's something that's close to what you want then it might be a consideration but I want to point out that Vanguard isn't the only uh company that offers asset allocation funds uh I shares by black rock is another uh example now Beyond asset allocation uh uh funds can we still consider a Target date retirement fund at first it might seem like well no Rob we can't do that because we're now retired we you know and Target date retirement funds change their asset allocation is that a good thing well there are two ways to at least cons consider a Target date retirement fund and let me show you what they are the first is and I'm going to use again I'm going to stick with black rock for a moment and as I said I'll link to all of this this is uh just a two-page summary of their target date ETFs and you can see here I mentioned that in the names of these funds and this is true with Fidelity and Vanguard and so on they put the years in right so if you wanted to retire in 2050 well here's your fund you could you could use that fund but what about folks that are already retired well all of the different Target date retirement funds offered by the various large com uh fund companies include one or more funds designed for once you're in retirement for ey shares uh they call it the ishares life path retirement ETF and this is the ticker let me quickly show you vanguards yeah Vanguard has something similar here it is Vanguard uh Target retirement income fund now the thing we have to know though let me go back to I shares not all of these funds are created equal the asset allocation from say I I shares retirement fund can be very different than what say vanguard's is and so you have to look at the asset allocation of these funds to see if it's what you want now we can do that here is let's see here's the I shares life path retirement ETF and we can come down here and look at let me find it here we go close maybe maybe not oh here we go so here's their we can look at geography breakdown but we want to look at asset class and we can see fixed income is 60% and equities are 40 so it's a 60 it's a it's a a 60% bonds 40% stocks which may or may not be what you you want I can tell you that I've done a I've looked at a lot of Target date retirement funds when you get to that retirement uh age and you've got the retirement version of their target date retirement fund they get very very conservative many of them get even more conservative than this one where the stock allocation is less than 40% so here you might say that's just too conservative does that mean Target date funds are out well not necessarily there is another strategy to consider let me show you what that is if we go back to ey shares and again I'm just using this as an example I pulled up up their 2035 fund one of the things that I've I've said many times is that while this year is designed to help investors pick the right fund when they're saving for retirement there's no rule that says you have to want to retire at 2035 to invest in this fund anybody can invest in this fund whether you maybe you want to retire in 2070 or maybe you've been retired for 10 years you can still you know invest in this fund if you want to and that opens up a lot of opportunities for us because we could go into the target date Fund in this case of I shares or you could pick Vanguard or you could pick Fidelity and say is there a Target date fund they offer that has the specific asset allocation that I want so if we look at this 2035 fund and we scroll down and find the uh the exposure this one happens to be about what 67 or 68% equities and 31 or 32% fixed income if that is close to the asset allocation you want or again you could pick the 2040 fund or the 2025 fund but if you find the fund and the fund family where where the fund has the asset allocation you want then you could consider a 2035 fund for example even if you're retired now now there is a catch These funds because they're Target date as time goes by will get more conservative meaning they'll shift some of the stock Investments over to bonds so what that means is you're going to have to keep an eye on the asset allocation of this fund and it may mean every couple of years maybe every five years depending on how how much the fund changes its allocation and what your investment goals are that you have to then take that money and put it maybe in the in the 20 240 fund 5 years from now as an example to get the asset allocation you want but you know to do that once every few years again we're talking about inside a retirement account not a taxable account where you can make that change without tax consequences sure maybe every two three five years you have to make that change but if it gets you the asset allocation you want it may be worth considering so the last thing I want to mention is this we've looked at asset allocation funds as as an option we've looked at Target date I'll call them retirement funds or or or income funds those funds that sort of at the end of the line where all of your money ends up once you retire uh we've talked about that as an option but again they can be somewhat conservative and then we've talked about just using a a regular Target date retirement fund of some year that matches the allocation you want just keep it in mind you have to keep an eye on the allocation because it does change uh I want to show you two other quick things or ideas the first is if you look at some Target date retirement funds you will see them this is Vanguard you'll notice they have a Target retirement 2020 fund wait a minute that doesn't seem right didn't aren't we in 2023 and if you go to Fidelity let's see look at this they have a they have a Target I if you can see that it's kind of small they have a 2005 fund and a 10 fund and a 105 fund it's like what don't shouldn't they be updating their websites not so fast what some funds do will they will continue to change the asset allocation As you move through into retirement and and you start to live your years in retirement other words some uh Target date retirement funds once you get to retirement they stop changing your asset allocation I think that's how I shares works I think others will continue to change your asset allocation into retirement for some number of years think five 10 or maybe even 15 years and then change or or then stop the change and have a a retirement income fund that you go into that doesn't keep changing so I want to point that out that's why you're seeing some fund families that'll have something like a Target date 2010 fund even though we're in 2023 again those might be other options worth considering depending on the asset allocation that that fund offers and what you're looking for the second thing I want to mention is you can maybe there are some of you that say Rob I like the idea of a of a of a single fund very simple but boy I'd really like to have more reats because I really want some exposure to real estate or maybe I want I'm a big Paul marman fan I want some small cap value well you can combine these you could say I'm going to put 90% of uh my money in an asset allocation fund but I'm going to take that other 10% and put it in a reate or 10% and put it in small cap value yes it complicates your portfolio a little bit because now you've got two funds instead of one but for some of you that might be what you need to get that exact exposure that you want uh again whether it's towards reats or it's towards small cap value or maybe it's uh towards tips because the asset allocation fund you've chosen uh doesn't offer tips by the way some of the target date retirement funds do offer tips in fact I'm pretty sure I shares does although you'll want to confirm that so you'll want to make sure you understand not only the stock Bond allocation of these funds but how they're investing your money within the stock allocation and within the bond allocation again I'll leave links to everything I've shown you below the video and of course if you have any questions leave them in the comments below I'll be happy to help you out any way I can until next time remember the best thing money can buy is Financial Freedom

Channel: Rob Berger

Views: 189,983

Keywords: investing in retirement, asset allocation funds, target date retirement funds, Vanguard LifeStrategy Funds, iShares asset allocation etf, ishares target date, ishares lifepath

Id: o_OJdMBG23w

Length: 17min 25sec (1045 seconds)

Published: Wed Nov 15 2023