Target Retirement Funds

[deca]

Thanks for sharing that, wellheeled. I didn't know about that. I just opened a Target 2045 account at Vanguard to rollover funds from a previous employer's retirement plan. They were pre-tax contributions so that sounds like it goes along with what you're saying. But when I open a Roth, I think you're saying a Target fund is not the best choice. I'm comfortable at my age being more aggressive and holding mostly/all stocks in my Roth IRA.

[meaghanchan]

Thanks for sharing that, wellheeled. I didn't know about that. I just opened a Target 2045 account at Vanguard to rollover funds from a previous employer's retirement plan. They were pre-tax contributions so that sounds like it goes along with what you're saying. But when I open a Roth, I think you're saying a Target fund is not the best choice. I'm comfortable at my age being more aggressive and holding mostly/all stocks in my Roth IRA.

Actually, both Roth IRAs and traditional IRAs (as well as 401ks, 403bs, etc) are considered tax-advantaged accounts. If it's tax-deferred (such as a traditional IRA) or tax-free (like the Roth), it's considered tax-advantaged. What wellheeled is talking about is if you opened an account at a brokerage or mutual fund company outside of any tax-advantaged structure. In that case, bonds aren't a great idea since all the income they produce is taxed at your normal income rate- up to 35%.

In short- Target Retirement funds are fine in a Roth.

[Scanner]

In that case, bonds aren't a great idea since all the income they produce is taxed at your normal income rate- up to 35%.

Except for muni bonds, which are tax-free income but I can't seem to sell the forum on their idea. . .

[Beccagold]

Thanks for sharing your insight, wellhealed! I am investing outside of 401k's & IRA's, so that definitely affects me. I really appreciate everyone's thoughts on this!

[meaghanchan]

Except for muni bonds, which are tax-free income but I can't seem to sell the forum on their idea. . .

There's nothing wrong with municipal bonds, if they're the right fit for your situation. A person in a high tax bracket who has filled their tax-advantaged accounts with bonds and still needs more should definitely consider municipal bonds. For other people there may be better choices.

[disneysteve]

Except for muni bonds, which are tax-free income but I can't seem to sell the forum on their idea. . .

I think the reason you don't get too many folks discussing muni bonds is that most on the board aren't in a tax bracket where it makes sense for them. I also get the impression that most folks here who are regularly investing are doing so within 401Ks and IRA/Roth accounts which are already tax-free or tax-deferred.