Huge Tax Bills at Vanguard: What Retirement Savers Need to Know
Stay Wealthy Retirement Podcast
Taylor Schulte, CFP®
4.7 • 678 Ratings
🗓️ 5 July 2022
⏱️ 33 minutes
🧾️ Download transcript
Summary
Today Jeremy Schneider dives into Vanguard Target Retirement funds (and the tax problems they're causing).
Specifically, he's sharing:
- What happened at Vanguard to trigger this giant tax issue
- Why this occurred in the first place
- What to do when it happens again
He's also answering two (2) BIG questions from listeners!
If you're ready to learn how to avoid future mutual fund tax surprises so you don't overpay the IRS, today's episode is for you.
Over age 50? Need retirement + tax planning help?
👉 Get Started With a Free Retirement Assessment
To grab the links mentioned in today's episode, visit the show notes page.
Transcript
Click on a timestamp to play from that location
| 0:00.0 | Welcome to the Stay Wealthy podcast of Taylor Schulte. |
| 0:08.2 | I'm your host, Jeremy Schneider, filling in for Taylor for five weeks from the end of June |
| 0:13.3 | to the beginning of July. |
| 0:14.9 | Today, I will be diving in to the controversy surrounding the Vanguard Target Date Index Fund tax bill debacle of 2021 that's actually |
| 0:24.9 | still ongoing. Maybe you heard about it, but specifically, I'm going to share what happened to these |
| 0:29.9 | Vanguard Target Date funds at the end of last year to trigger potentially huge tax bills for some |
| 0:35.5 | investors, why it actually happened, if it's going to |
| 0:39.1 | happen again this year, and what to do about it. And I'm also going to answer two questions |
| 0:44.3 | from listeners. So if you're ready for a deep dive into Vanguard's Target Date funds, the tax |
| 0:49.4 | implications and best practices moving forward, today's episode is for you. For all the links and resources |
| 0:55.9 | mentioned in today's episode, head over to you staywealthy.com slash 159. |
| 1:05.2 | All right, let's start from the beginning, Vanguard's Target Date Funds. What is a Target |
| 1:09.7 | Date Fund? Taylor has talked about this on |
| 1:11.8 | the show before. I'm sure a lot of listeners to this show already know, but for some basic |
| 1:15.8 | background, it's basically a mutual fund that contains a handful of mutual funds inside. |
| 1:22.1 | It's a fund of funds that is designed to be balanced across U.S. stock market index funds, international stock |
| 1:30.6 | market index funds, and bond funds. And it doesn't actually need to be index funds. |
| 1:35.5 | There are target date funds that are actively managed. Vanguard's version is all index funds. |
| 1:41.7 | These funds are designed to be balanced automatically, and they also reallocate as you age. |
| 1:47.9 | So if you are a young person in your 20s and you have like a 50 year investing time frame, |
| 1:52.1 | they're going to be about 90% stocks. But if you're a person around retirement age, like 65, |
| 1:57.0 | they're going to be more closer to a 50-50 portfolio of stocks and bonds. Then if you're in your late 70s, they're going to be more like 80% bonds and 20% stocks. And it does a nice asset allocation. So you don't need to rebalance your portfolio. You can just buy one fund. Inside of that fund is everything you need. It goes on to the age. It's like a one-and-done combo package deal of all of your mutual funds you need. So goes on to use the age. It's like a one and done combo package deal of all of your mutual funds you need. |
... |
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