Stable value funds

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Jpg
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Stable value funds

Post by Jpg » Thu Mar 05, 2015 9:40 pm

My 457 Plan offers a Stable Value Fund with a guaranteed 2.3 % interest rate. Should I use this for my fixed income portion.Or, should I just use Vanguard Total Bond Index ? I am 60 /40. 60% is Vanguard Total Stock index.I am 53 and will retire next year with a public employee pension $4,300 per year 3% Cola . Thanks for your help.

Topic Author
Jpg
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Re: Stable value funds

Post by Jpg » Thu Mar 05, 2015 9:41 pm

4,300 per Month Pension.

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joe8d
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Re: Stable value funds

Post by joe8d » Thu Mar 05, 2015 10:03 pm

My 457 Plan offers a Stable Value Fund with a guaranteed 2.3 % interest rate. Should I use this for my fixed income portion.
Yes.
All the Best, | Joe

nun
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Re: Stable value funds

Post by nun » Thu Mar 05, 2015 10:21 pm

With $4300/month pension who needs fixed income.

I might keep a bit of emergency cash in the 457 stable value but with a safe pension income coming in I'd probably be upping my equity allocation.

Dandy
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Re: Stable value funds

Post by Dandy » Fri Mar 06, 2015 7:54 am

Why not use both. I loved using my stable value fund and used it for all of my 401k fixed income - because other fixed income choices were really bad. I recommend doing a split between the two options. Some Stable Value Funds limit movement so you want to understand any restrictions. You have 2 good options.

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Jpg
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Re: Stable value funds

Post by Jpg » Fri Mar 06, 2015 8:06 am

. I will consider increasing to 70/30 or 75/25.Ben Graham believed you should never have more than 75% stock,although with a guaranteed pension he may have allowed 90/10.I believe Warren Buffet said he recommends his heirs do a 90/10 stock/bond index funds. Even though I am in for long haul, I do not want to lose -40% like 2008. I would appreciate some feedback on these issues.Thanks.

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Jpg
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Re: Stable value funds

Post by Jpg » Fri Mar 06, 2015 8:17 am

Thanks Dandy.I agree with your view and will split my fixed income portion 50/50 Stable Value & Total Bond Index.Do others agree with NUN that because I have a guaranteed $4,300 per Month with 3% Cola I should be more aggressive ? Others may believe that a pension means you do not have to be aggressive with larger equity allocation . I would appreciate everyone's thoughts on this issue.

asif408
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Re: Stable value funds

Post by asif408 » Fri Mar 06, 2015 8:43 am

If you need to take the risk and are willing to then you can increase your equity allocation. But if you can meet your goals with your current allocation there isn't a need to increase your equity allocation.

Dandy
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Re: Stable value funds

Post by Dandy » Fri Mar 06, 2015 9:00 am

I don't have the COLA pension like you do. But, with pensions and SS my situation is very good. While that advantage could make for more aggressive investing I decided to be conservative and preserve the "win". I would really feel like a fool and let my family down if having a secure retirement I got greedy and then went from a secure retirement to one that was at risk. I'm at 42% equities which is still a substantial dollar amount.

I sleep well with my decision. It doesn't mean being a bit aggressive is bad just that the trade off for a bit more growth at the expense of less secure retirement isn't one that I favor.

trueblueky
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Re: Stable value funds

Post by trueblueky » Fri Mar 06, 2015 9:07 am

Jpg wrote:Thanks Dandy.I agree with your view and will split my fixed income portion 50/50 Stable Value & Total Bond Index.Do others agree with NUN that because I have a guaranteed $4,300 per Month with 3% Cola I should be more aggressive ? Others may believe that a pension means you do not have to be aggressive with larger equity allocation. I would appreciate everyone's thoughts on this issue.
3% COLA wouldn't have looked so good 1917-20, 1942, 1946-47, 1974, 1979-81, which were all periods of double-digit inflation. From 1967 to 1993, there was only one year when inflation was less than 3%. While inflation does not appear to be a threat today, no one knows what the next 40 years will bring. For that reason, recommend some of your tax-deferred fixed income be in TIPS and some of your taxable account be in I Bonds. Forty years is an extremely long time to assume low inflation.

I don't think you should be more aggressive because of your pension. I agree you can be more aggressive, if that suits your risk tolerance.

kolea
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Re: Stable value funds

Post by kolea » Fri Mar 06, 2015 12:57 pm

Jpg wrote: Even though I am in for long haul, I do not want to lose -40% like 2008. I would appreciate some feedback on these issues.Thanks.
You only lost it if you sold at the bottom. Otherwise you got it all back plus a whole lot more.

The choice to go 75/25 has less to do with you having a pension and more to do with your tolerance for risk.

For 30 years I was 100% equities and have no regrets at all. I am now closer to 70/30, but only because my heart cannot take the stress of market crashes any more. :)
Kolea (pron. ko-lay-uh). Golden plover.

rgs92
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Re: Stable value funds

Post by rgs92 » Fri Mar 06, 2015 1:09 pm

This isn't a question of what makes you feel good. Figure out how much inflation-adjusted income you need above your pension and social security using reasonable assumptions of inflation and rates of return based on history (using Firecalc and/or similar tools), and set up an asset allocation (using Boglehead methods) and withdrawal plan accordingly. Just do the math and this should be easy and you can sleep soundly.
(Or you could just watch CNBC all day and listen to Harry Dent or Jim Grant or Peter Schiff or Rick Santelli and watch the Gold commercials and drive yourself crazy...)

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