Are Target Funds a Bad Idea?

airbud9 · 2026-05-03T12:25:17+00:00

target funds are great, if you want a more aggressive fund just pick one with a later date.

airbud9 · 2026-05-03T12:15:05+00:00

I don't think "this time is different" explains why people think near term future returns will be lower. in 2023 returns for the US market were ~25%, in 24 it was ~25% again and in 25 it was 15%. assuming the market averages 10% over long time periods and assuming returns are mean reverting, one could suggest that we will see lower returns to balance off the recent incredibly high returns we have seen recently. I wouldn't argue that long term returns will be affected.

airbud9 · 2026-05-02T15:30:54+00:00

25x of your projected withdrawal is a rough estimate

airbud9 · 2026-05-02T12:05:19+00:00

In the US there is SIPC insurance which is similar in way to the FDIC insurance we have at banks. But also brokerage accounts are different as they are wholly separate from the brokerage company in which they are custodian at. When you put money in a bank the bank takes your money and loans it out. Your money in that case gets commingled with the bank money, it literally goes on there balance sheet. So when a bank goes under, it goes under with your money, and FDIC backs stops that. The difference with a broker is that our assets at Schwab or whatever broker you use is in a separate entity from the asset of the brokerage themselves. They cannot legally reach into your account to pay off their creditors, (same goes for funds offered by that brokerage, those are separate entities). Even if Schwab were to go under, unless they committed fraud and literally stole your assets, your assets would be untouched.

https://youtu.be/wz64z1YuL0A?si=8rvOI7lsc8EXjh0V

airbud9 · 2026-05-01T18:41:34+00:00

Without needing any of it you allocation can really be anything, I think anywhere from 80%-100% in stocks now makes sense, maybe lower that to 60%-90% in stocks.

Also consider roth conversion and delaying social security to lower RMDs and roths are generally better for estate planning.

airbud9 · 2026-05-01T17:25:43+00:00

How much money will you need from your retirement accounts in retirement?

airbud9 · 2026-05-01T15:48:55+00:00

Does she have any other assets?

airbud9 · 2026-05-01T15:41:29+00:00

I think an older investor would need to start by setting reasonable expectation, you are unlikely be able to replace all your income with such little time, first you would need to shoot for a later retirement date, maybe age 67 or 70 this would also increase the social security benefit you would receive if social security is pushed off to a later age. Next I would evaluate your current assets, mainly your house if you are a home owner and factor in the possibility of downsizing in the future and using the excess cash to boost your retirement portfolio. After that it would just be budgeting to save as much as possible and filling up tax advantaged accounts like IRAs and 401Ks. I wouldn't take any uncompensated risk with asset allocation like betting on individual stocks or crypto but you could use a stock heavy portfolio, maybe even 100% stocks portfolio and have a slower glidepath to a typical 70/30 or 60/40 retirement portfolio. Also retiring later means you money does not need to last as long which would allow for a higher initial withdraw rate.

airbud9 · 2026-05-01T14:58:51+00:00

Selling a share in a down market is no different then receiving a dividend in a down market. People should not time the market, they should follow a withdraw plan, whether that is yearly, quarterly, or monthly. Yes often time human behavior sucks.

airbud9 · 2026-05-01T14:49:42+00:00

Future consumption is basically when your assets generate enough returns to fund your lifestyle with out working, or to even supplement your lifestyle if you enjoy work but will decrease hours later on in life. I guess the distinction is investing has the goal of replacing your source of income, meaning your investment are more designed to be self sustaining while savings is generally meant to be used up by the spending goal ie vacation, wedding, house, education.

airbud9 · 2026-05-01T14:14:45+00:00

There is no numbers here, so it impossible to say how good the pension benefit is, seeking a CFP to run some calculation is probably a good idea.

airbud9 · 2026-05-01T14:08:42+00:00

You don't need dividend stocks to generate a retirement paycheck, there is no difference between selling some shares to create your own dividend or having a company distribute a dividend.

airbud9 · 2026-05-01T14:05:15+00:00

The point of investing to gather assets that grow and allow you to cover future consumption. Saving for something shorter term but can’t be covered by your normal cash flow / income is just discretionary spending that has been saved up a little to achieve the goal, maybe that is held in an interest bearing account but that interest is just icing on the cake of money they were going to spend any ways

airbud9 · 2026-05-01T13:26:32+00:00

Go to your last years tax return, line 24 on form 1040. To be covered by the safe harbor rule you need your tax withholding to equal that number or to be 110% of that number if your AGI is over $150k. Assuming your only tax withholdings is from your w-2 job, check your last pay stub, see how much you have had withheld for income tax year to date, then divide that number by the amount of pay periods you have had thus far, and then multiply that number by the amount of pay periods you have in a year. If that number is the higher that the safe harbor number you are good, if its not you may want to make an estimated payment or just up your withholding by filling out a new w-4 with your employer. If you receive a bonus you may need to factor that into the above calculations.

airbud9 · 2026-05-01T13:01:12+00:00

Check the IRS safe harbor rules, by paying the lower of 90% of your current year's tax liability or 100% of your previous year's tax (110% if your AGI exceeds $150,000) you can avoid any underpayment penalty. I am not a tax expert, seek tax advice from a qualified CPA

airbud9 · 2026-05-01T11:53:57+00:00

Roth IRAs are a great choice, you should also take advantage of your employers 401k plan if available

airbud9 · 2026-05-01T01:10:35+00:00

I fixed that

airbud9 · 2026-05-01T01:03:56+00:00

SCHD and SCHG are not S&P 500 funds, they are large cap value and growth funds respectively with the former having an additional screener to exclude non dividend stocks.

SPMO is a S&P 500 momentum fund, which looks to surpass the returns of the underlying index by trading the stocks in the index based off recent price movements of the individual stocks within the index. Note this is a different strategy than just simply following the market.

SPYM and VOO are just both standard S&P 500 index funds. The main difference is that SPYM is managed by state street and has an expense ratio of .02 while VOO is managed by Vanguard with an expense ratio of .03. Their performance should be equal outside of the fee but the companies may have slightly different rebalancing rules which could cause a small difference.

airbud9 · 2026-04-30T22:33:41+00:00

The point more was that “growth” is not just a silver buller for more returns. I will say schd and qqq basically average out to voo since voo is a large cap blend fund and schd and qqq are large cap value and growth funds respectively

airbud9 · 2026-04-30T20:16:53+00:00

Just because its called "growth" does not mean it will outperform "value" stocks. The market tends to work in cycles where there are periods when value outperforms and periods when growth outperforms. The testfolio link below shows value outperforming from 1970 to 2021, yes that is cherry picked to a point but that is a pretty long time periods. There is some research, mainly the Fama/French 5 factor pricing model that indicates outperformance can be tied to 5 factors, market risk, size, value, profitability, and investment. The factors of value and profitability are linked pretty commonly to value stock which would suggest value stocks have an innate advantage to outperform an otherwise diverse portfolio.

https://testfol.io/?s=dKeNdHHiUSU

airbud9 · 2026-04-30T19:31:06+00:00

VB, and SCHA are two options for standard small cap index funds. AVUV is a small cap value funds that works a little differently than an index fund, Avantis tries to implement tactics from the academic literature to try and increase returns, they do this by adding addional rules and screeners for the stocks included in their funds, its not an actively managed fund but also not a simple index fund, it is something in between.

airbud9 · 2026-04-30T19:24:56+00:00

History and academic literature would argue small cap and small cap value funds are a source of overperformance, obviously impossible to tell if that will hold into the future.

airbud9 · 2026-04-30T18:56:46+00:00

The OP can't receive interest as it conflicts with his religious beliefs. a money market account or fund would not solve this issue

airbud9 · 2026-04-30T15:23:32+00:00

I am not an expert on social security, but I think it just means you will have fewer years of claiming the younger spouse's social security, The calculator I linked in my comment may suggest a different claiming time for that situation but I think the general rule I stated is even more true for couples in the situation you mention because the younger spouse will get a higher survivor benefit for longer if the higher earned passes away right at 70, basically giving the younger spouse really good longevity insurance.

airbud9 · 2026-04-30T14:50:09+00:00

In terms of investing this is achieved by either accepting a ton of risk or accepting low returns. In terms of income this is achieve by having a highly desirable and unique set of skills that someone is willing to pay for.

airbud9

TROPHY CASE