401K Rollover - Lump Sum or DCA into TIPs now

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cody69
Posts: 74
Joined: Sat May 03, 2014 7:46 am

401K Rollover - Lump Sum or DCA into TIPs now

Post by cody69 »

Recently retired and rolling company 401K into existing Vanguard IRA account. I'll transfer the assets in the 401K to same assets in the IRA, with the exception of TIPs, which my 401K did not offer as an investment option. In lieu of having TIPS in the 401K, as per Larry Swedroe's Winning Bond Strategy, short term bonds were used instead.

The question I'm pondering is should I move all the monies from the ST bond fund into TIPs now, all at once. Or should I set up a schedule and invest it over time. The amount moving into TIPS is a high 6-digit amount.

For reference, our overall 50%/50% stock/bond allocation is:
35% US Stock - Total Stock Mkt (VTSAX)
15% International Stock - Total International Stock (VTIAX)
30% Intermediate Bonds - Intermediate Bond Index (VBILX)
15% TIPS - Inflation Protected Securities (VIPSX)
5% Cash
Topic Author
cody69
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Joined: Sat May 03, 2014 7:46 am

Re: 401K Rollover - Lump Sum or DCA into TIPs now

Post by cody69 »

Any thoughts?
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retiredjg
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Re: 401K Rollover - Lump Sum or DCA into TIPs now

Post by retiredjg »

If you must move money that is invested I see no reason not to reinvest it the day it hits the new account.

What do you think could be accomplished by taking money out of short term bonds and then dribbling it into TIPS?

That's not a snarky question. I'm just curious why you don't seem to be concerned about immediately investing the other 85% of the money but do wonder about this 15% going into TIPs.
Topic Author
cody69
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Joined: Sat May 03, 2014 7:46 am

Re: 401K Rollover - Lump Sum or DCA into TIPs now

Post by cody69 »

I'm not concerned with the majority of the roll-over because there is no change in the asset classes... hence the portfolio remains the same.

Where I am concerned is where there is a change in investments going into a new asset class... the short term bond transferring to TIPS.
What do you think could be accomplished by taking money out of short term bonds and then dribbling it into TIPS?
I'm viewing the asset class change (ST bonds -> TIPS) similar to investing new money into the market... although in this case into TIPS.
As a cautious investor, I'm interested in others views on making a sizable investment into this asset class... all at once or over time.

Hope that answers your question.
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retiredjg
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Re: 401K Rollover - Lump Sum or DCA into TIPs now

Post by retiredjg »

It does. I just consider both to be bonds and both are low risk investments. It is not much of a change in my mind and so I would do a lump. Others might see it differently.

Edited to add...I guess Vanguard rates its short term bonds as a 1 and the tips fund as a 2 so there might be some difference in risk. It would not be enough for me to consider not lumping it in though.
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gmaynardkrebs
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Re: 401K Rollover - Lump Sum or DCA into TIPs now

Post by gmaynardkrebs »

I’d just put it all in TIPS. The inflation protection costs you virtually nothing.
wetgear
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Re: 401K Rollover - Lump Sum or DCA into TIPs now

Post by wetgear »

cody69 wrote: Wed Jan 26, 2022 6:50 am Recently retired and rolling company 401K into existing Vanguard IRA account. I'll transfer the assets in the 401K to same assets in the IRA, with the exception of TIPs, which my 401K did not offer as an investment option. In lieu of having TIPS in the 401K, as per Larry Swedroe's Winning Bond Strategy, short term bonds were used instead.

The question I'm pondering is should I move all the monies from the ST bond fund into TIPs now, all at once. Or should I set up a schedule and invest it over time. The amount moving into TIPS is a high 6-digit amount.

For reference, our overall 50%/50% stock/bond allocation is:
35% US Stock - Total Stock Mkt (VTSAX)
15% International Stock - Total International Stock (VTIAX)
30% Intermediate Bonds - Intermediate Bond Index (VBILX)
15% TIPS - Inflation Protected Securities (VIPSX)
5% Cash
Why roll the 401k over at all? Does it have high fees or ERs?
Topic Author
cody69
Posts: 74
Joined: Sat May 03, 2014 7:46 am

Re: 401K Rollover - Lump Sum or DCA into TIPs now

Post by cody69 »

Why roll the 401k over at all? Does it have high fees or ERs?
A good question... the main reasons include:
1. fund selection is limited
2. costs, while not bad, are not nearly as competitive as Vanguard
3. 401K platform is clunky... I worry about security not having 2FA... overall reporting is weak
4. fund performance is not as strong as Vanguard counterparts
5. I don't like the lack of transparency into fund operations... since they are not public funds, there's no tracking, visibility into dividends, etc... only changes in NAV
6. Consolidating providers makes managing the portfolio simpler
Topic Author
cody69
Posts: 74
Joined: Sat May 03, 2014 7:46 am

Re: 401K Rollover - Lump Sum or DCA into TIPs now

Post by cody69 »

Edited to add...I guess Vanguard rates its short term bonds as a 1 and the tips fund as a 2 so there might be some difference in risk. It would not be enough for me to consider not lumping it in though.
Thank you for your response.

Yes, with a duration of 7.5 years, the Vanguard TIPS fund (VIPSX) has higher interest rate risk than a short term bond fund with 2.5 years duration. It was this area that was causing my consternation regarding lump sum investing as opposed to a DCA path.
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