VPTLX or VAIPX or both for large IRA

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exoilman
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VPTLX or VAIPX or both for large IRA

Post by exoilman »

Opinions needed for the following.

I am 77 & DW 71 so RMD’s been required for me and now DW. My account has 1MM VBTLX & 1MM VAIPX along with other investments I don’t think are necessary to complete this question. Our overall accounts 30/70 so very conservative. We are highest tax bracket NJ & Federal.

No need to acquire more wealth but what ideas for these two funds. My own thoughts were all VAIPX because of inflation adjustment? Also any tax advantaged ideas (ROTH conversions?) welcome.

PM OK

Thanks
Sam
Topic Author
exoilman
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Re: VPTLX or VAIPX or both for large IRA

Post by exoilman »

Change VPTLX to VBTLX

:oops:
Sam
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mrpotatoheadsays
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Re: VPTLX or VAIPX or both for large IRA

Post by mrpotatoheadsays »

I recommend Paul Merriman's take on your bond partition: 50% Vanguard Intermediate-Term Treasury Index, 30% Vanguard Short-Term Treasury Index and 20% Vanguard Short-Term Inflation-Prot Sec Index. These are the safest of the safe; the goal is preservation of capital. In NJ, you do not pay State taxes on these fund's dividends; they obviously hold just Treasuries.

Inflation-protected securities don't always win; the bond market is often times the most efficient. I recommend reading some academia papers on treasuries vs. TIPS; I believe Paul has written some articles on the topic too.
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vineviz
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Re: VPTLX or VAIPX or both for large IRA

Post by vineviz »

exoilman wrote: Tue May 11, 2021 5:01 pm Opinions needed for the following.

I am 77 & DW 71 so RMD’s been required for me and now DW. My account has 1MM VBTLX & 1MM VAIPX along with other investments I don’t think are necessary to complete this question. Our overall accounts 30/70 so very conservative. We are highest tax bracket NJ & Federal.

No need to acquire more wealth but what ideas for these two funds. My own thoughts were all VAIPX because of inflation adjustment? Also any tax advantaged ideas (ROTH conversions?) welcome.
With such a large bond allocation, I think your intuition to be all in VAIPX is probably a good one. At the very least most of your bonds should be in TIPS.

I’d stay away from the short-term TIPS fund at Vanguard, which they like but I think is not useful. If you want a short term bond fund, Vanguard Short-Term Investment-Grade Fund Admiral Shares (VFSUX) is a reasonable alternative.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: VPTLX or VAIPX or both for large IRA

Post by abuss368 »

exoilman wrote: Tue May 11, 2021 5:01 pm Opinions needed for the following.

I am 77 & DW 71 so RMD’s been required for me and now DW. My account has 1MM VBTLX & 1MM VAIPX along with other investments I don’t think are necessary to complete this question. Our overall accounts 30/70 so very conservative. We are highest tax bracket NJ & Federal.

No need to acquire more wealth but what ideas for these two funds. My own thoughts were all VAIPX because of inflation adjustment? Also any tax advantaged ideas (ROTH conversions?) welcome.

PM OK

Thanks
Sam
Sam -

That would depend on if you feel you are exposed to unexpected inflation. Remember social security adjusts for inflation. You also have stocks.

Inflation bonds are paying almost no income.

Total Bond is an excellent strategy and provides monthly dividends. I have friends and family long retired with this simple one fund.

It works and that is why it is the largest bond fund on the PLANET!

Tony
John C. Bogle: “Simplicity is the master key to financial success."
tomd37
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Re: VPTLX or VAIPX or both for large IRA

Post by tomd37 »

Tony,
We are almost a year down the road from your last post with inflation coming more and more into play. As an older couple in our mid-80s we have been using VG Intermediate-Term Bond Index Fund (VBILX) along with VG Total Stock Market Index Fund (VTSAX) as the primary funds in our 40/60 asset allocation TIRA. We also use VTSAX in a taxable account representing about 10% of our total assets. We both draw SS benefits along with my military pension and of course RMDs. Our current income is such that we don't consume all our income and therefore have a small amount that could be reinvested in the taxable account or kept as 'dry powder'.

I have been thinking whether any portion of our 60% bond allocation should be invested in either short-term (VTAPX) or intermediate-term (VAIPX) Treasury Inflation Protected Securities (TIPS). I have read and kept a Vanguard paper of several years ago on the subject of TIPS where they, at the time, seemed to favor short-term vs. intermediate-term TIPS.

If TIPS are considered to be in order, the question would come down to what percentage of the bond allocation should go to TIPS? I am not necessarily wanting to change, so any comments you or other readers have to offer would be appreciated.
Regards,
Tom
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billyt
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Re: VPTLX or VAIPX or both for large IRA

Post by billyt »

Looking in the rear view mirror, total return for VAIPX (TIPS) is slightly better than VBLTX (total bond) over the last 10 years. Today's SEC yield for VAIPX is -1.25% real and VBLTX is 2.18% nominal. I would guess that if inflation remains relatively high that the TIPS should do better, but I don't know. What puzzles me is that total return from VAIPX started to beat VBLTX some time before the recent uptick in inflation. I frankly don't understand that. For myself, retired, with a 50/50 portfolio, roughly half of my bond holdings are VAIPX (TIPS).

Billy T
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