A Viewer's Target-Date Bucket Plan: 7 Questions I'd Ask

A viewer I'll call Fred is 66 and just retired, with $2.1 million in IRAs. He wants to follow the bucket strategy using just three Vanguard target-date funds: the 2035, 2040 and 2050 funds. He'd spend from the 2035 fund first. If he wants to keep the same level of risk, every five years he'd move each fund to the one five years later.

I'd never heard of anyone doing this, so in this video I kick the tires on his plan. I run it through seven questions:

Is it simple?
Is it low cost?
Is it diversified?
Does the mix fit the goal?
Is each asset in the right account?
Are the buckets worth it?
Is there a simpler way?

Resources mentioned in the video:

Vanguard Target Retirement 2035 Fund (VTTHX): https://investor.vanguard.com/investment-products/mutual-funds/profile/vtthx
Vanguard Target Retirement 2040 Fund (VFORX): https://investor.vanguard.com/investment-products/mutual-funds/profile/vforx
Vanguard Target Retirement 2050 Fund (VFIFX): https://investor.vanguard.com/investment-products/mutual-funds/profile/vfifx
Vanguard Total World Stock ETF (VT): https://investor.vanguard.com/investment-products/etfs/profile/vt
Vanguard Total Bond Market ETF (BND): https://investor.vanguard.com/investment-products/etfs/profile/bnd
FICalc retirement calculator: https://ficalc.app/
Bill Bengen's 1994 4% rule paper: https://web.archive.org/web/2020/https://www.retailinvestor.org/pdf/Bengen1.pdf
Empower (free retirement planning tool I mention): https://go.robberger.com/empower/yt-tdf-bucket-strategy
Boldin (retirement planning software I mention): https://go.robberger.com/boldin/yt-tdf-bucket-strategy
ProjectionLab (retirement planning software I mention): https://go.robberger.com/projectionlab/yt-tdf-bucket-strategy
Vanguard LifeStrategy Growth Fund, 80/20 (VASGX): https://investor.vanguard.com/investment-products/mutual-funds/profile/vasgx
Vanguard LifeStrategy Moderate Growth Fund, 60/40 (VSMGX): https://investor.vanguard.com/investment-products/mutual-funds/profile/vsmgx

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0:00 A bucket strategy built from target-date funds
0:35 Fred's situation: $2.1 million at 66
1:16 Should money you need soon be safer?
2:54 His plan: three Vanguard target-date funds
3:57 What's inside a target-date fund
4:37 The 7 questions I'd ask about his plan
5:26 Is it simple? (and a two-fund version)
7:59 Is it low cost?
8:57 Is it diversified?
10:04 Is 76/24 the right mix?
10:50 How much can $2.1 million support? (FICalc)
12:37 Asset location: stocks in the Roth?
15:23 Are the buckets worth it?
16:58 If stocks fall 30%: three buckets vs. one fund
19:10 Simpler ways to hold the same mix

ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. I've since sold my websites, bought them back, and started a new website and this YouTube channel.

I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (https://amzn.to/3by10EE)

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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