The Intersection of FIRE and Disney

[Hoosier John]

All in VTSAX!

VTSAX would be my vote too. It is small to medium size companies (something like the top 2500 companies, less the top 500). It is more volatile, but over the years does quiet well. (note: I don't actually use Vanguard, rather Fidelity, but they are probably quite similar)

ETA: Edits per SFF's description below. I didn't know exactly, as I don't own it, and I have it associated with the Dow Completion Fund. Thanks!

 

[Frwinkley]

I have seen VTSAX mentioned so many times in this thread.

We currently have some retirement assets in a Vanguard 2025. We will be retiring before that and won’t need to touch that money for about 13 years (RMDs). Should we move some of that money? Maybe move it into a target retirement fund with a date further out?

I’d love to hear some opinions.

 

[AlohaNow]

They have target date retirement funds which can be a good place to start. That is what we did. For example, we thought we would retire in 2025 so that is the fund we chose to start. It is easy to switch to a different one if you want to later.

This is what we did for DS18 just last month. Since he earned at least $1,000 last year we gifted him the money to get his Roth started. I explained to him all the different options for funds that he had to choose from, and why a target date fund made the most sense for him. It was weird choosing Fund 2065, but that's what a young person needs! @Castlequeen5 once you make your initial deposit into a 'sweep fund' or 'money market', whatever Vanguard calls it, you can then go online and make your 'buy' into your chosen fund(s). That is making the actual investment, as a sweep fund just earns a money market rate. You can also call Vanguard to do this. Ask ALL the questions you want to make sure you understand what you are investing in - Vanguard people are great! Low fees, wonderful service. I recommend Vanguard a lot to people. And I'm so happy that you are starting a Roth!

 

[Rob Huff]

As you spend more time looking into investment options, be sure to keep an eye on expense ratios, especially if you're investing in target date funds. The expense ratios can get seriously hefty on those. This isn't an issue with Vanguard's 2065 fund -- the expense ratio is just 0.16% and it's 0.15% on the 2055 fund -- but it is an issue on lots of target date funds. The first one I Googled just now -- the Fidelity 2055 fund -- has an expense ratio of 0.75%. That extra fee will add up in a big way, especially compounded over a few decades!

 

[SouthFayetteFan]

VTSAX would be my vote too. It is small to medium size companies (something like the top 2500 companies, less the top 500). It is more volatile, but over the years does quiet well. (note: I don't actually use Vanguard, rather Fidelity, but they are probably quite similar)

That’s not necessarily an accurate description of VTSAX:

Vanguard Total Stock Market Index Fund is designed to provide investors with exposure to the entire U.S. equity market, including small-, mid-, and large-cap growth and value stocks. The fund’s key attributes are its low costs, broad diversification, and the potential for tax efficiency. Investors looking for a low-cost way to gain broad exposure to the U.S. stock market who are willing to accept the volatility that comes with stock market investing may wish to consider this fund as either a core equity holding or your only domestic stock fund.

The funds top holdings are Apple, Microsoft, Google, Amazon, Facebook, Tesla and J&J. I love me some VTSAX!

 

[disfanforlife]

I have seen VTSAX mentioned so many times in this thread.

We currently have some retirement assets in a Vanguard 2025. We will be retiring before that and won’t need to touch that money for about 13 years (RMDs). Should we move some of that money? Maybe move it into a target retirement fund with a date further out?

I’d love to hear some opinions.

I am thinking about the same exact thing now too.

 

[Hoosier John]

I have seen VTSAX mentioned so many times in this thread.

We currently have some retirement assets in a Vanguard 2025. We will be retiring before that and won’t need to touch that money for about 13 years (RMDs). Should we move some of that money? Maybe move it into a target retirement fund with a date further out?

I’d love to hear some opinions.

If you like the target date fund (Vanguard 2025), then I think you should be in a 2035 fund or later, as that's your target.
For most people, their target is when they retire, but not you. This will be a little more aggressive over the next decade.

 

[bernina]

If you like the target date fund (Vanguard 2025), then I think you should be in a 2035 fund or later, as that's your target.
For most people, their target is when they retire, but not you. This will be a little more aggressive over the next decade.

I agree with this.

Target date funds are very useful and a good guidepost to get to a reasonable asset allocation based on retirement year (or as mentioned above, the year you plan to need the money).

What can be even better is to decide on an asset allocation of stocks/bonds (including cash) based on your risk tolerance and timeframe and then buy something like VTSAX and VBTLX (total bond fund) in a ratio that makes sense for you. Lower cost than most target date funds, but does require manually rebalancing once a year or so.

 

[Hoosier John]

I agree with this.

Target date funds are very useful and a good guidepost to get to a reasonable asset allocation based on retirement year (or as mentioned above, the year you plan to need the money).

What can be even better is to decide on an asset allocation of stocks/bonds (including cash) based on your risk tolerance and timeframe and then buy something like VTSAX and VBTLX (total bond fund) in a ratio that makes sense for you. Lower cost than most target date funds, but does require manually rebalancing once a year or so.

That's a great idea! If a person had a pension plan or other money that the average person doesn't have, I would consider that to be part of your bond/cash bucket, leaving more for the stocks part (which will generally help you outpace inflation)

 

[SouthFayetteFan]

I agree with this.

Target date funds are very useful and a good guidepost to get to a reasonable asset allocation based on retirement year (or as mentioned above, the year you plan to need the money).

What can be even better is to decide on an asset allocation of stocks/bonds (including cash) based on your risk tolerance and timeframe and then buy something like VTSAX and VBTLX (total bond fund) in a ratio that makes sense for you. Lower cost than most target date funds, but does require manually rebalancing once a year or so.

I hate the level of bond allocations they build into those target funds. Even in the 2065 one they have 10% bonds. 100% equities over here baby!!! Give me all the risk!!

 

[bernina]

I hate the level of bond allocations they build into those target funds. Even in the 2065 one they have 10% bonds. 100% equities over here baby!!! Give me all the risk!!

Yes! We're forced into target date funds in our 401ks (only low cost option) and they're heavy on international and bonds. This leads me to play games and pick a date that's 5-10 years later than our actual planned retirement).

 

[amalone1013]

Yes! We're forced into target date funds in our 401ks (only low cost option) and they're heavy on international and bonds. This leads me to play games and pick a date that's 5-10 years later than our actual planned retirement).

I think mine is like that too. I should go through the options and look at the ratios and such again

 

[Hoosier John]

Yes! We're forced into target date funds in our 401ks (only low cost option) and they're heavy on international and bonds. This leads me to play games and pick a date that's 5-10 years later than our actual planned retirement).

I agree completely. At times, at work I have been in 2050-2065 (to see how daily rebalancing might help). My actual withdrawal date is more like 2030-2035. But we also have a few index funds - which I just switched into the small-med cap index.

 

[Frwinkley]

Regarding VTSAX:

I'd love to hear from you younger folks. Are you just dumping money in and watching it grow?

I'm thinking I might want to do the same for future grandchildren's educational expenses.

I think I like the idea of moving our retirement accounts to target retirement funds with later dates.

 

[QueenIsabella]

I hate the level of bond allocations they build into those target funds. Even in the 2065 one they have 10% bonds. 100% equities over here baby!!! Give me all the risk!!

You and me, both! But, we also have pensions, and I consider SS to be like a bond fund. I also have a pretty high tolerance for risk. That's important--not everybody does, which is fine. Each individual has to decide for him/herself how much risk is the right amount. It can also change--I may feel differently once DH actually retires. But in general I've found that the more I read and understand finances, the more risk I can tolerate.

I'm sure I mentioned it, but my MIL was an active trader until the day she died (at age 86). She owned a number of stocks. We just sold off the ones with no capital gains tax owed (currently trading under the stepped-up cost basis), because we have a college-goer staring us in the face. We didn't want to wait until the last minute.

 

[Bubs1]

I'd be interested to hear thoughts on this.

We aim to max out our Roth's each year. We've always just taken the yearly max and had 1/12th taken from our bank accounts each month.

If we have the cash now, should we dump it in and just get it in the market sooner rather than later (we put it all in VTSAX)? I'm definitely not a market timer, and dollar cost averaging always was the autopilot way to get our money in. Just had a thought today as I was balancing accounts if maybe this is something I should consider.

We'll still be doing our monthly (bi-weekly for DH) 401k and mega backdoor which are much larger amounts than our Roth's. So maybe it doesn't really matter. Curious to hear how folks here handle Roth contribution frequency.

 

[Starport Seven-Five]

https://twitter.com/x/status/1364650028166311941

I felt like this listening to the latest ChooseFI episode where they spent 5 minutes talking about buying a TV for $40 like it had any impact on reaching FI.

 

[RamblingMad]

As you spend more time looking into investment options, be sure to keep an eye on expense ratios, especially if you're investing in target date funds. The expense ratios can get seriously hefty on those. This isn't an issue with Vanguard's 2065 fund -- the expense ratio is just 0.16% and it's 0.15% on the 2055 fund -- but it is an issue on lots of target date funds. The first one I Googled just now -- the Fidelity 2055 fund -- has an expense ratio of 0.75%. That extra fee will add up in a big way, especially compounded over a few decades!

You also want to pay attention to the bid/ask spreads and premium or discount to NAV as well. It’s a combination of all of these things not just the ER.

 

[bernina]

I wanted to share a cool spreadsheet I came across while evaluating if we should dump some excess cash towards our mortgage. This works for fixed loans only.

We're a little more than halfway into our 15 yr mortgage with a balance of around $115k at 4%. We could refinance to a lower rate, but neither of us really feel a strong desire to do this. We feel like we're close enough to paying this thing off that we just want to ride it out (emotional choice here vs what likely makes more financial sense).

While evaluating our current cash situation and upcoming bonuses I threw an idea out to DH about taking around $46k and throwing it at the mortgage. We have other access to cash for real emergencies (low rate HELOC, taxable brokerage, and will still have some cash sitting around). I was curious to estimate the amount we'd save on interest and that's when I stumbled across this calculator.

In the past I'd just plug our rough numbers into an online calculator and it would get close enough, but I wanted something that would allow me to plan out a few scenarios and also see how extra payments would shorten the loan.

https://www.mortgagecalculator.org/download/excel.php

I set up the basic info and then entered in extra payments that we'd made along the way (I had my bank send me the amortization schedule for my mortgage last year so I had that information available). It came out to what I had from the bank down to the penny. Now I can play around with all kinds of scenarios and see exactly how much we'd save on interest and how it would shorten the loan.

This $46k payment will save us $8k in interest and shave a few years off our mortgage. Pretty much a no brainer decision for us.

 

[Starport Seven-Five]

The only caution I'd make (which you acknowledged) when running a calculator like that is it's not considering opportunity costs vs those savings. Plugging that 46k into a compound interest calculator at 7% gives you a return of 27.8k over 7 years. That's not a guaranteed return though as the 7% figure is pulled from historic data while your interest savings are.

It also depends on priorities of course as we plan to payoff our house before entering retirement (which pushes this math out the window) but it's something to balance.

https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator