Mrs. Ruffles has a fairly small (<$7.5k) inherited IRA at Fido from which she has to take an even smaller RMD (at least in the years when they’re required). Except for the RMDs, it hasn’t been touched since she inherited it and is all in FMAGX (probably originally from the Peter Lynch era). I’d like to move it into one fund that won’t have such massive potential drawdowns. With this size, I don’t think it’s worth working with too many moving parts though I’ve put three years of RMD money into a cash equivalent.
I’ve been considering JABAX, BALFX, VLAAX which are all NTF at Fido. Any comments or other suggestions?
Comments
The first 3 funds in the below chart are from your note. I've added FBALX because of personal bias and BRUFX is added, as it was mentioned. FPURX is a decent fund, but not charted; as it and FBALX run very close over the long term. As the account is already within Fido, I would stay there for the many choices, quality service and to not add another firm to keep paperwork simple. BRUFX is fully a stand alone fund/organization and would take you away from flexibility with fund exchanges into the future.
None of these balanced funds will keep one away from a draw down from a large market correction.
Hopefully, the chart will provide a decent visual for your purposes.
10 year chart for total returns, JABAX , BALFX , VLAAX , FBALX , BRUFX
My 2 cents.
Catch
BRUFX is out because of its standalone status. I have PRWCX in my IRA but there’s no way to get it in this account because of the soft close.
@catch22 I know I can’t avoid a drawdown but I want to try and keep it manageable to one that will recover in a reasonable amount of time. While this account is a tiny portion of her portfolio, she doesn’t like seeing the balance drop precipitously. She’s happier hitting a solid double than taking a chance on striking out going for a grand slam.
As she’s still working, she doesn’t need (or even want) the RMD (and its taxes) from this or her other much larger inherited accounts but just wants to make sure the entire nest egg stays relatively healthy until she reaches retirement.
If she inherited multiple IRAs from the same person, she could combine them into a larger inherited IRA. That wouldn't solve the problem of having to take RMDs, but it could simplify and/or give her more flexibility.
As @Graust points out, thinking in terms of investment stability, she can virtually ignore the fact that there are RMDs. RMDs are more of a tax event than a forced change of investments.
Regarding specific investment suggestions to achieve "doubles", you've already gotten some good suggestions and I'm sure you'll get some more.
Here's a 2016 article from Kitces that covers rolling over inherited 403(b)s. Take it with a grain of salt, as the more recent SECURE Act has changed some things (e.g. eliminating stretch IRAs if the original owner died after 2019, but extending the non-stretch period allowed from five years to ten years).
https://www.kitces.com/blog/non-spouse-beneficiary-stretch-of-inherited-ira-and-401k-or-403b-employer-retirement-plans/
One of the things Kitces points out is that one has (or had?) the option of doing a rollover Roth conversion of the 403(b). That is, rolling the inherited T-403(b) directly into an inherited Roth IRA. Of course taxes would be due upon conversion. This could provide Mrs. Ruffles a way to increase the assets in that small inherited Roth IRA, assuming both the 403b and Roth IRA were inherited from the same person.
Of course this would not eliminate RMDs.
Even if the 403(b)s could not be combined with existing inherited IRAs (Roth or Traditional), rolling them over could still simplify administration. OTOH, Mrs. Ruffles may have investment options in the 403(b)s that are unique to them (e.g. stable value or TREA, or R6 share class of funds, or ...).
GAVAX
HSTRX
PRWCX/RPGAX/TMSRX
I own all of them for TRP funds for my MIL.
I do own smattering of VLAAX which I plan to add to after taking tax losses in other funds, however it would not be my 1 fund. When I imagine 1 fund I cannot think "long term". I have to think year over year and the TRP funds are as aggressive as I would get.