Model IRA Portfolios for Vanguard Investors

Plus: How to minimize the ‘bad timing effect’ to pocket higher returns. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=57233&elqTrackId=150810851d08462e988d2483f6eb2ca4&elq=2b18e7044d5c448f9177dc88a7940926&elqaid=57233&elqat=1&elqCampaignId=29175&elqak=8AF51B12320A3ABF76BF36801AD678AA45CCC0CE5F241A88E459A6318DDEF77C6125) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] Recent research from Vanguard revealed a surprising finding: A lot of the money in IRAs—either the result of rollovers from company retirement plans or from direct contributions —is sitting in cash instruments rather than being invested in stocks or bonds. A sample of Vanguard accounts found that 28% of the accounts funded through rollovers in 2022 were still sitting in cash 12 months later; 55% of the accounts funded through direct contributions were sitting on ice after a year. And it’s not just a short-term phenomenon: The firm found that rollovers that sit in cash tend to stay that way for at least seven years. Vanguard noted that what it calls “the sticky IRA cash trap” tended to be particularly pronounced among younger savers, the very people who are most likely to benefit from long-term compounding. Is the problem inertia? Analysis paralysis? It doesn’t really matter. What matters is getting those assets invested. This week I shared some examples of reasonable [Vanguard portfolios for investors’ IRA accounts](. (I’ve developed similar portfolios for Vanguard investors’ taxable accounts.) As with all of my model portfolios, there are [“bucket” portfolios]( geared toward retired people who are actively spending from their portfolios as well as portfolios geared toward working people who are still saving. I created minimalist portfolios as well as portfolios that combine active and index funds. The in-retirement active/index portfolios contain a slice of Vanguard Wellesley Income, which Russ Kinnel recently put on a short list of “[3 Incredibly Dull Funds That You Should Buy]( (Tori Brovet also included Wellesley Income [on a recent list of the best Vanguard funds]( all of which are rated Gold by Morningstar’s analyst team.) Russ points out that boring funds—usually ones that pay a lot of attention to managing volatility—do a great job of keeping people in their seats. That, in turn, helps ensure that they capture most of what their funds actually return. That boring is beautiful has been a consistent finding in [Morningstar’s annual “Mind the Gap” study, spearheaded this year by Jeff Ptak](. Jeff found that poor timing decisions, often exacerbated by investors’ choosing volatile funds, cost investors about 15% of their returns over the past decade. Allocation funds like Vanguard Wellesley Income, which split its assets between stocks and bonds, had the narrowest gap of any broad category group between actual returns and the returns that investors actually pocketed. Also on the topic of investor timing, [John Rekenthaler riffed on sequence of returns in his column this week](. John explores the interplay between the size of the account balance and the point in the investor’s lifecycle when good (or poor) market returns materialize. We often hear sequence risk discussed narrowly in the context of retirement decumulation, but John’s piece shows that it matters throughout our investing careers. Finally, I was thrilled to see that my book, [How to Retire](zg_bs_g_2731_d_sccl_1/143-2932733-6203903?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=57233&psc=1&elqTrackId=3f2e0700b50743b1bea0d70b59bd2472&elq=2b18e7044d5c448f9177dc88a7940926&elqaid=57233&elqat=1&elqCampaignId=29175&elqak=8AF566270B7EBF4543E082A1A5FCDBCFB59CC0CE5F241A88E459A6318DDEF77C6125), is already [finding its way to people’s houses](li:activity:7233959368788996096/?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=57233&elqTrackId=8b67361281514374b5de1a6d203c5ef2&elq=2b18e7044d5c448f9177dc88a7940926&elqaid=57233&elqat=1&elqCampaignId=29175&elqak=8AF58D96F25A3DA03090153C4A6B48C3D887C0CE5F241A88E459A6318DDEF77C6125)! It’s not officially out yet, but it’s available for preorder now. If you get your mitts on it, [like my friend Fritz Gilbert did]( be sure to let me know what you think. With warm regards, Christine Benz [Model IRA Portfolios for Vanguard Investors]( Minimalist three-fund portfolios and active/index fund portfolios for retirees and retirement savers. [Check It Out]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [Tax-Efficient Portfolios for Vanguard Investors]( These 12 portfolios—6 for retirees and 6 for retirement savers—are designed to minimize investment expenses and tax costs. [See the Portfolios]( [The Bucket Approach to Building a Retirement Portfolio]( A diversified portfolio with various time frames can help you meet your income needs during retirement. [Read More]( [3 Incredibly Dull Funds That You Should Buy]( Boring funds are easy to own. [Watch Now]( [The Best Vanguard Funds]( These top-rated Vanguard ETFs and mutual funds are excellent choices to buy and hold in 2024 and beyond. [See the List]( [Why Investors Missed Out on 15% of Total Fund Returns]( And six ways that you can try to close the gap. 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