What Would Be The "best" Vanguard Mm And Bond Funds?
I like to transfer some of my Vanguard SEP IRA and regular IRA to a taxable money market fund and taxable bond fund.
Currently they are both in Vanguard taget retirement 2025 fund.
Which taxable Vanguard bond and money market funds would be “best” for my IRA’s?
I think you didn’t mean a “taxable” fund but instead meant an income producing fund. If it stays in the IRA it is not “taxable”.
I use the Primecap MM that is backed by corporate bonds. The return has been higher than others on average, longer term. But the return is down right now. The ones backed by Treasuries are a little more stable but return less.
I would be cautious about bond funds. Bond rates are historically low right now but when the economy starts to recover and rates rise bonds will take a hit to the capital values.
Most retail investors do the exact wrong thing. They buy high and sell low. That is what you are thinking of doing.
Stocks are low, bonds are high. Buy Low, Sell High would tell you that you should be buying stocks. I would suggest you average in to more stocks in the next year. Move some each quarter.
History says that will make you the most money.
You might want to stay in the 2025 fund. Personally I like the 2050 to get more stocks. But I am aggressive. Those funds have been rebalancing as stocks fell. They are moving money out of the bonds and in to the stocks to keep their percentages. When stocks move up they will do the opposite. If you sell some now you will be missing the upside to that process.
Don’t sell low. You should think about selling stocks when they are hitting new highs but few people will do that. But don’t sell stocks now that they are at decade lows. You are WAY too late for that even if we dip lower in the short term.
Why would you want to transfer funds from a tax deferred IRA fund to a taxable fund unless you’re over 70 1/2 and have required distributions.
Say you have 100,000 in the IRA/SEPP. If you make $3,000 from money market you reinvest 103,000 the following year. If you had the same in a taxable MM , you’d have to take out $750 to pay Federal taxes ( assuming you are in a 25% tax bracket) plus any state & local taxes. So at best you’d be reinvesting 102,250 the following year. Multiply that by how many years? 5, 10, 20?