(PUB) Investing 2016

are 59½ years old (unless you feel like paying a 10% fee on withdrawals, plus income taxes), and forces you to take distributions upon reaching the age of 70½, paying income taxes at your future—and possibly higher—tax rate. In contrast, when contributing to a Roth IRA, you invest with after-tax dol- lars now and can withdraw funds tax- free after the age of 59½ or if you meet other IRS qualifications (for instance, if the distributions will be used for a first-time home purchase—something today’s kid might appreciate tomor- row—or to help with a disability). Once you do hit retirement, there is >

so you won’t put this off. It’s impor- tant and especially timely given that the April 15 deadline for contributions seems to sneak up quickly on those who’ve procrastinated about making their deposits. The Roth IRA is an excellent retire- ment savings vehicle for younger peo- ple. Since their introduction in 1998, Roth IRAs have been garnering respect (and dollars) from knowledgeable investors for the advantages they have over traditional IRAs. While a traditional IRA allows you to deduct your contributions pre-tax, it also locks your money in until you

sum that will continue to grow for many years to come. It won’t pay for a nurs- ing home just yet, but then again, he’s got a few years before that becomes an issue. And he’s learned the value of early and long-term investing and com- pounding. With a good job, he’s already saving outside his IRA and is funding a 401(k) at work. My daughter’s IRA, smaller because she’s younger, is also growing. (I matched her earnings too.) And yes, after a job change, she’s got a 401(k) as well. Okay. That’s my kids. What about yours? Let’s go back and review my thinking on the teenage Roth IRA,

DISTRIBUTIONS TO COME Pay Close Attention This Year

IT’S THAT TIME OF YEAR AGAIN. While it seems like the December distribution period happened just a couple of weeks ago, time marches on, and March marks 2016’s first round of quarterly distributions, as well as any supplemental distributions that Vanguard must pay out. Supplemental distribu- tions are gains or income that were earned but not distributed in 2015 and must be paid out before the end of the first quarter to keep funds in compli- ance with SEC regulations. Health Care and Energy are habitual supplemental distributors of both income and capital gains. Even Precious Metals & Mining paid out a $0.148 income distribution in March 2015. While Health Care could be expected to pay out an additional gain this year, I’d be pretty surprised if either of the two other funds did. In addition, given the state of the bond market, the inflation funds may not pay out any income, either. Last year, a number of taxable income funds paid out extra capital gains. Vanguard should have the data for 2016 out by early March. As a reminder, I encourage taxable investors to direct distributions to money market accounts instead of reinvesting immediately in the fund where the distribution came from (something I practice with my own money). This allows you the flexibility to redeploy the money to underperforming funds or to pay a tax bill without having to sell shares down the road. Also, please pay close attention to how your distributions are handled if you have consolidated your brokerage and fund accounts. As you know, Vanguard messed up a lot of shareholders’ distribution instructions when they did the consolidation. If you want your distributions in cash, make sure that’s what happens. If you want them reinvested, again, keep your eye on what Vanguard’s doing. Catch any mistakes early and have them corrected immediately. The list of quarterly income payers is below:

Telecommunication Services Index Total International Stock Index Total Stock Market Index Total World Stock Index Utilities Index Value Index Wellesley Income Wellington World ex-U.S. Index World ex-U.S. SmallCap Index

REIT Index Short-Term Inflation-Protected Securities Index SmallCap Growth Index SmallCap Index SmallCap Value Index Social Index STAR LifeStrategy Cons. Growth STAR LifeStrategy Income Target Retirement Income Tax-Managed Balanced Tax-Managed Capital Appreciation Tax-Managed SmallCap

Global ex-U.S. Real Estate Index Growth Index Health Care Index High Dividend Yield Index Industrials Index Inflation-Protected Securities Information Technology Index

500 Index Balanced Index Consumer Discretionary Index Consumer Staples Index Convertible Securities Developed Markets Index Dividend Appreciation Index Emerging Markets Stock Index

LargeCap Index Materials Index MidCap Growth Index MidCap Index MidCap Value Index Pacific Index

Energy Index Equity Income European Index Extended Market Index Financials Index

Remember, the ETF shares of the funds listed above will also pay out distributions. Additionally, a few other ETFs are scheduled to pay out regular quarterly income:

S&P 500 Value ETF S&P MidCap 400 ETF

Russell 2000 Growth ETF Russell 2000 Value ETF Russell 3000 ETF S&P 500 Growth ETF

Russell 1000 ETF Russell 1000 Growth ETF Russell 1000 Value ETF Russell 2000 ETF

Extended Duration Treasury ETF MegaCap ETF

S&P SmallCap 600 Growth ETF S&P SmallCap 600 Value ETF

MegaCap Growth ETF MegaCap Value ETF

The Independent Adviser for Vanguard Investors • March 2016 • 13

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