Pension Lump Sum: Short-term bonds?

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Diver4242
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Pension Lump Sum: Short-term bonds?

Post by Diver4242 » Sat Jul 21, 2018 6:26 am

I was laid off/"retired" recently at 60. My ex-employer is sending me a lump-sum pension distribution check, so I'll put that into a Vanguard IRA. I have a few side hustles and some cash/other funds so I won't be needing the money for a few years. Please review my logic as far as how to allocate this in the IRA and let me know your thoughts/opinions. Thanks in advance for any help.

We're in a long bull run. Based on Schiller/CAPE and other readings/metrics the market seems to me to be overvalued. I believe many enterprises are over-leveraged in debt and have taken to the latest fad of propping up EPS with buybacks and other financial engineering. Not all, of course, but too many. I think, personally now, that we're in a kind of house of cards, especially since a correction is overdue.

So why would I invest in any stocks now, if I believe we're at the top or close, and the mantra is buy low, sell high? Logic tells me to seek safe haven with this money and move it to equities later. Yes, I know trying to time the market is bad, but I feel strongly we're about as high as we're going for a while. How to time the bottom? You can't, but by watching CAPE/Schiller, VIX, other metrics you at least get a sense. I don't need to know the exact bottom, but buying in at any time in a correction is better than buying in now, when I believe we're at the top.

So I'm looking at bonds for this money. Since I feel interest rates are going to climb, I would go more short-term, correct? I also believe we're heading for increased inflation, so that would lead me to go with inflation-protected. I also think we're heading for recession, so I'm looking at a 5% stake in GLD.

I'm looking at these funds or some mix of them, for now: VTAPX (inflation-protected short-term), GLD, VBIRX (short-term t-notes), VMLUX (muni national short-term), VFIDX (corp short/intermediate 6 yr avg), VTABX (world bond long).

retiredjg
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Re: Pension Lump Sum: Short-term bonds?

Post by retiredjg » Sat Jul 21, 2018 7:24 am

What you are considering is called "market timing". It usually does not work very well. You should probably just invest the lump sum in the asset allocation you have chosen for your retirement portfolio. The fact that you don't want to do that indicates that maybe you are not at the right asset allocation for your temperament. So maybe that needs to be reassessed.

People have been sitting on the sidelines for years, waiting for a market drop so they could put their money in. They have lost out on a very nice upward climb.

Diver4242
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Re: Pension Lump Sum: Short-term bonds?

Post by Diver4242 » Sat Jul 21, 2018 7:46 am

I've done very, very well in my funds over the past nine years. I started backing away from equities in January, as part of my own yearly assessment. It was part logic and part good luck, so far that was a remarkably good point to sell off most of my stock funds and move them to more conservative assets.

I'm not one of those who sit and fret, but given that, I'm reluctant to buy any stock funds right now. The markets have been somewhat erratic, and seem to be teetering on the balance of the downward decline that we know must occur sometime soon as part of the natural lifecycle of bull and bear market trends and corrections. Then there's all that other stuff going on, so I think folks are wise to be cautious. I think it's very unlikely that we're somehow going to see another surge and upward trend. Entrerprises have spent that tax cut fuel, and unfortunately, it seems many didn't invest enough of it back into the business. The piper will have to be paid.

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Re: Pension Lump Sum: Short-term bonds?

Post by dwickenh » Sat Jul 21, 2018 9:04 am

Diver4242 wrote:
Sat Jul 21, 2018 7:46 am
I've done very, very well in my funds over the past nine years. I started backing away from equities in January, as part of my own yearly assessment. It was part logic and part good luck, so far that was a remarkably good point to sell off most of my stock funds and move them to more conservative assets.

I'm not one of those who sit and fret, but given that, I'm reluctant to buy any stock funds right now. The markets have been somewhat erratic, and seem to be teetering on the balance of the downward decline that we know must occur sometime soon as part of the natural lifecycle of bull and bear market trends and corrections. Then there's all that other stuff going on, so I think folks are wise to be cautious. I think it's very unlikely that we're somehow going to see another surge and upward trend. Entrerprises have spent that tax cut fuel, and unfortunately, it seems many didn't invest enough of it back into the business. The piper will have to be paid.
Many people that do forecasting for a living agree with you. Just remember, they have also been wrong many times more than they
have been right. If you believe in percentages and risk management, I wouldn't try to guess the future.

But if you can reach your goals with your assets in a short term bond fund for years, then go for it.

Best wishes,

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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Re: Pension Lump Sum: Short-term bonds?

Post by macheta » Sat Jul 21, 2018 9:10 am

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Re: Pension Lump Sum: Short-term bonds?

Post by macheta » Sat Jul 21, 2018 9:10 am

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Re: Pension Lump Sum: Short-term bonds?

Post by macheta » Sat Jul 21, 2018 9:11 am

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Re: Pension Lump Sum: Short-term bonds?

Post by macheta » Sat Jul 21, 2018 9:11 am

I'm in the same boat sort of. I'm getting ready to take a lump sum. What are your thoughts on investing in the following:

"... VTAPX (inflation-protected short-term), GLD, VBIRX (short-term t-notes), VMLUX (muni national short-term), VFIDX (corp short/intermediate 6 yr avg), VTABX (world bond long)."

I still am going to use the thee fund strategy but I'm a little concerned with inflation and interest rate risk.

Diver4242
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Re: Pension Lump Sum: Short-term bonds?

Post by Diver4242 » Sat Jul 21, 2018 9:35 am

"I still am going to use the thee fund strategy but I'm a little concerned with inflation and interest rate risk."

We're definitely concerned about inflation, and we're still figuring out the allocations of those funds I listed. For that reason (inflation) we will have the largest percentage in VTAPX (50%), then VBIRX (20%), VMLUX (10%), VFIDX (10%), VTABX (5%), GLD (5%).

As the original poster said in the other discussion here about short-term bonds, if I'm wrong I don't stand to lose that badly. I'm just banking on a storm coming, and want to ride it out without getting burned too bad. I rode out the last few downturns, but I was farther from retirement then, as opposed to now, when I'm essentially newly retired (with side hustles).

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Re: Pension Lump Sum: Short-term bonds?

Post by Cyclesafe » Sat Jul 21, 2018 9:46 am

Diver4242 wrote:
Sat Jul 21, 2018 6:26 am
I was laid off/"retired" recently at 60. My ex-employer is sending me a lump-sum pension distribution check, so I'll put that into a Vanguard IRA. Make sure that you and your employer follow the correct procedure for transferring your lump-sum pension distribution to a Vanguard IRA. You don't want to be immediately and irreversibly liable for income taxes on a "distribution". If you are uncertain, call your ex-employer to hold off and call Vanguard for guidance.

We're in a long bull run. Based on Schiller/CAPE and other readings/metrics the market seems to me to be overvalued. I believe many enterprises are over-leveraged in debt and have taken to the latest fad of propping up EPS with buybacks and other financial engineering. Not all, of course, but too many. I think, personally now, that we're in a kind of house of cards, especially since a correction is overdue. Maybe, maybe not. There's never a time when there isn't uncertainty. The talking heads need to make a living. They may be right (sometimes), they may be wrong (often). A broken (analog) clock is right twice a day.

So why would I invest in any stocks now, if I believe we're at the top or close, and the mantra is buy low, sell high? Logic tells me to seek safe haven with this money and move it to equities later. Yes, I know trying to time the market is bad, but I feel strongly we're about as high as we're going for a while. How to time the bottom? You can't, but by watching CAPE/Schiller, VIX, other metrics you at least get a sense. I don't need to know the exact bottom, but buying in at any time in a correction is better than buying in now, when I believe we're at the top. You are saying you are smarter than the market. For your sake, I hope you are. You should test your conviction by leveraging yourself to the max and selling short (joke). Actually, you might consider doing nothing until you understand the advice you are being given.

So I'm looking at bonds for this money. Since I feel interest rates are going to climb, I would go more short-term, correct? I also believe we're heading for increased inflation, so that would lead me to go with inflation-protected. I also think we're heading for recession, so I'm looking at a 5% stake in GLD. You might consider investing in firearms and canned good too. (We might want to do that anyway...)

I'm looking at these funds or some mix of them, for now: VTAPX (inflation-protected short-term), GLD, VBIRX (short-term t-notes), VMLUX (muni national short-term), VFIDX (corp short/intermediate 6 yr avg), VTABX (world bond long).

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Re: Pension Lump Sum: Short-term bonds?

Post by retiredjg » Sat Jul 21, 2018 9:49 am

Diver4242 wrote:
Sat Jul 21, 2018 7:46 am
I've done very, very well in my funds over the past nine years. I started backing away from equities in January, as part of my own yearly assessment. It was part logic and part good luck, so far that was a remarkably good point to sell off most of my stock funds and move them to more conservative assets.
There is nothing wrong with moving to a more conservative stance over time. If putting your pension into bonds is part of that, that's just fine.

If you think you can move back and forth into and out of stocks, some day it's going to backfire on you and your losses could be substantial. You were lucky to get out at what you consider "a good time", but it is something else to get back in at "a good time" and do it consistently. Unfortunately, doing it inconsistently will probably cost you in the long run.

This is why it is just better to pick an allocation you are comfortable with in both the good times and the bad times.

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Re: Pension Lump Sum: Short-term bonds?

Post by Diver4242 » Sat Jul 21, 2018 10:17 am

"You might consider investing in firearms and canned good too. (We might want to do that anyway...)"

Oh, I'm definitely invested in those, and a lot more. Fully prepped, including Mestel SGE 400/3 BBs at the ready. :-)

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Re: Pension Lump Sum: Short-term bonds?

Post by Diver4242 » Sat Jul 21, 2018 10:25 am

retiredjg wrote:
Sat Jul 21, 2018 9:49 am
There is nothing wrong with moving to a more conservative stance over time. If putting your pension into bonds is part of that, that's just fine.

If you think you can move back and forth into and out of stocks, some day it's going to backfire on you and your losses could be substantial. You were lucky to get out at what you consider "a good time", but it is something else to get back in at "a good time" and do it consistently. Unfortunately, doing it inconsistently will probably cost you in the long run.

This is why it is just better to pick an allocation you are comfortable with in both the good times and the bad times.
Thanks, retiredjg. Throughout my thirty years or so of investing, I've been that way (buy and hold, infrequent changes). I get very nervous about making big changes, not reacting to emotion, etc because I understand where it goes in almost all cases. But these times seem a bit different. Back to my original post, I have a high degree of confidence that we're at the tail end of a long bull, and just don't want to buy into equities right now. This thought process was triggered by getting this lump sum pension that I'm rolling over (yes, made sure of that and thanks to the other person who replied with detailed and excellent in-context comments) to a Vanguard IRA.

So, I'll park in these short-term bonds for a bit, and at some point, without obsessively trying to time the bottom, I'll shift back to what my normal conservative position was--that being just a few funds to reflect the US and international stock market and bond market, and just yearly rebalance by nudging the allocation levers every so slightly.

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Re: Pension Lump Sum: Short-term bonds?

Post by Sconie » Sat Jul 21, 2018 10:49 am

Diver4242 wrote:
Sat Jul 21, 2018 10:25 am
So, I'll park in these short-term bonds for a bit, and at some point, without obsessively trying to time the bottom, I'll shift back to what my normal conservative position was--that being just a few funds to reflect the US and international stock market and bond market, and just yearly rebalance by nudging the allocation levers every so slightly.
Well, the Fed is on record as indicating that they plan on continuing on with their path of increasing short-term interest rates-----and when short rates increase, short-term bonds DO NOT do well. Why don't you go with shorter CDs instead??
I know that you think you understand what you thought I said, but I don't think you realize that what I said is necessarily what I meant......

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Re: Pension Lump Sum: Short-term bonds?

Post by vineviz » Sat Jul 21, 2018 10:53 am

Diver4242 wrote:
Sat Jul 21, 2018 10:25 am
But these times seem a bit different.
These are some of the most dangerous words an investor can believe.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Diver4242
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Re: Pension Lump Sum: Short-term bonds?

Post by Diver4242 » Sat Jul 21, 2018 10:54 am

Sconie wrote:
Sat Jul 21, 2018 10:49 am
Well, the Fed is on record as indicating that they plan on continuing on with their path of increasing short-term interest rates-----and when short rates increase, short-term bonds DO NOT do well. Why don't you go with shorter CDs instead??
Good point. I actually neglected to mention that when the time comes (if I ever get my #!@ lump-sum) I intend to see if that's an option under the choices that Vanguard offers. I've been more aggressively laddering CDs lately as well, as part of my much beefed-up cash position.

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Re: Pension Lump Sum: Short-term bonds?

Post by Sconie » Sat Jul 21, 2018 11:06 am

Diver4242 wrote:
Sat Jul 21, 2018 10:54 am
Sconie wrote:
Sat Jul 21, 2018 10:49 am
Well, the Fed is on record as indicating that they plan on continuing on with their path of increasing short-term interest rates-----and when short rates increase, short-term bonds DO NOT do well. Why don't you go with shorter CDs instead??
Good point. I actually neglected to mention that when the time comes (if I ever get my #!@ lump-sum) I intend to see if that's an option under the choices that Vanguard offers. I've been more aggressively laddering CDs lately as well, as part of my much beefed-up cash position.
It is an option, however, I believe that you'll have to do it under the Vanguard Brokerage option; see current rates and term, here:

https://investor.vanguard.com/cd-bond/
I know that you think you understand what you thought I said, but I don't think you realize that what I said is necessarily what I meant......

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Re: Pension Lump Sum: Short-term bonds?

Post by rgs92 » Sat Jul 21, 2018 11:12 am

There is no "mantra" saying buy low, sell high, as that's easier said than done.
The idea is the Bogle quote of "the correct holding period is forever."
Then, when you need money, sell according to your asset allocation.

You mention that you feel this and feel that. Investing according to feelings is generally the road to ruin (or at least poor performance).
Learn to ignore your feelings when investing and savings. Fear and greed are feelings, and following those waves of emotion usually works against you.

You also say you are reluctant to buy stock funds "right now." That is recency bias, precisely. That's another thing to always avoid.

Summary: Feelings such as fear, greed, and recency bias will lead to no good. (Well, every one has these feelings, but the trick is not act on them.)

Good luck.

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Re: Pension Lump Sum: Short-term bonds?

Post by DG99999 » Sat Jul 21, 2018 12:28 pm

D4242,

I think you are on the right track, but maybe for a different reason.

It seems best that if you are forced to take your pension early as a lump sum - you should try to match the level of risk this asset would have incurred had you remained employed and been able to "keep" it (at least for those fairly close to retirement = this assumption might be poor if you have several decades to go before retiring)

There are many ways to debate what that risk really is and I am sure there can be much divergence in the proper asset allocation to match it, but I think the funds/asset classes you are considering would be closer than any significant allocation to stocks. (I would add that it would have been best if this asset had already been accounted for in your overall portfolio with some appropriate proxy - that would have made the rollover allocation simple).

To extend this thinking further, you could even ask yourself how you would have ultimately used this pension - then you might question whether this rollover is headed toward (or could go directly to) some sort of SPIA.
I am not a financial professional. My posts are only my opinion on the topic. You need to do your own due diligence and consult with a professional when addressing your financial questions.

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Re: Pension Lump Sum: Short-term bonds?

Post by retiredjg » Sat Jul 21, 2018 2:37 pm

DG99999 wrote:
Sat Jul 21, 2018 12:28 pm
It seems best that if you are forced to take your pension early as a lump sum - you should try to match the level of risk this asset would have incurred had you remained employed and been able to "keep" it (at least for those fairly close to retirement = this assumption might be poor if you have several decades to go before retiring)
Interesting approach.

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Re: Pension Lump Sum: Short-term bonds?

Post by Diver4242 » Sat Jul 21, 2018 3:02 pm

rgs92 wrote:
Sat Jul 21, 2018 11:12 am
There is no "mantra" saying buy low, sell high, as that's easier said than done.
The idea is the Bogle quote of "the correct holding period is forever."
Then, when you need money, sell according to your asset allocation.

You mention that you feel this and feel that. Investing according to feelings is generally the road to ruin (or at least poor performance).
Learn to ignore your feelings when investing and savings. Fear and greed are feelings, and following those waves of emotion usually works against you.

You also say you are reluctant to buy stock funds "right now." That is recency bias, precisely. That's another thing to always avoid.

Summary: Feelings such as fear, greed, and recency bias will lead to no good. (Well, every one has these feelings, but the trick is not act on them.)

Good luck.
Yeesh, that sounded fairly hostile. Ok, since you seem to become upset at anything called "feelings", let's take that out of the equation. I "feel" a certain way to go is correct for me at this time due to logic, observations, study. Here's more elaboration on what I mentioned earlier.

For example - A yield curve that's narrowing and moving toward inversion. When has that happened in the past? I'm sure you know.

For example - Inflation. It's on the rise. Prices rose for businesses 3.4% last month, the biggest jump in quite a while (not to mention the effects of an insane trade war).

For example - Debt. Total debt among non-financial U.S. companies is at a record high, relative to the size of the U.S. economy.

For example - Lots of mergers and buyouts. Activity for both tends to peak around market tops.

For example - Extreme uncertainty in so many areas as the county that seems to have lost its collective mind, led by a chaotic government and leader that lurch from one bad decision to another.

Just because closing your eyes to everything around you has worked before, doesn't mean it will always work. As I said, I'm sixty and retired. If I was thirty and still in my career, I wouldn't worry about it.

Lots of things are different now. Buying a home was always a pretty sure-fire good investment, right?

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Re: Pension Lump Sum: Short-term bonds?

Post by retiredjg » Sat Jul 21, 2018 3:22 pm

I don't think it was hostile at all. Just accept it as an opinion that differs from yours written by someone who cared enough to reply to your request for comments.

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Re: Pension Lump Sum: Short-term bonds?

Post by Nightowl99 » Sat Jul 21, 2018 3:48 pm

I think you're right to be a little conservative with this money since a crash is bound to happen sooner or later. The only problem is, nobody knows when the crash will happen. So here's an idea that's in between being a Boglehead and being a market timer: Decide on what the best asset allocation is for you. Then, for the stock funds you want to own, wait until there's a bad day on Wall Street, when they're saying that it's a "correction," to buy those stock funds. Or do this over a period of time, if it makes you more comfortable. In theory, the research seems to show that, a lot of the time, you may be better off investing a lump sum all at once since you're missing out on dividends and interest the whole time you're not invested. Still, it's wise to take some time to think about it first.

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Re: Pension Lump Sum: Short-term bonds?

Post by g$$ » Sat Jul 21, 2018 4:39 pm

Do you have to take it as a lump sum now?

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Re: Pension Lump Sum: Short-term bonds?

Post by BigJohn » Sat Jul 21, 2018 5:28 pm

I think it’s appropriate for you to be conservative with this investment due to early retirement sequence of return risk. How conservative is a matter of personal choice. If you “have enough”, don’t have the need to take risk and will sleep better at night, I’m not not sure I’d worry too much about conventional wisdom.

If you need some expert to weigh in on your side, what you are talking about is similar to the bond tent idea by Kitces. FWIW, I’m taking an approach like this. The one thing about your approach that is not consistent with this is the idea of “getting back in at the right time”. I think the discipline of having a planned change to your AA is a better approach but that’s just my two cents.

https://www.kitces.com/blog/managing-po ... -red-zone/

Best of luck! :beer

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Re: Pension Lump Sum: Short-term bonds?

Post by billfromct » Sat Jul 21, 2018 5:45 pm

Just as a follow-up to what Cyclesafe said. Make sure your employer's trustee does a "trustee to trustee" transfer. If you are going to deposit this money into a Vanguard rollover IRA, the check should be made out to "VFTC FBO Diver4242" (Vanguard Fiduciary Trust Company, For Benefit Of).

If the check is made out to you directly, the pension trustee will have to withhold 20% Federal income tax. I believe you can still place the money into a "rollover" IRA, but you will have to make up the 20% that was withheld. Plus I'm sure there will be forms you will have to fill out when you do your 2018 Federal income tax.

Make sure you create a detailed letter of instruction when you forward the check to Vanguard including the rollover IRA account you established with Vanguard. When I did this same thing (trustee to trustee transfer) a year or 2 ago with Fidelity as the pension trustee, the lump sum pension check was mailed to me & I had to forward the check to Vanguard along with the letter if instruction I created.

bill

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Re: Pension Lump Sum: Short-term bonds?

Post by steve roy » Sat Jul 21, 2018 6:10 pm

VANISHED because of duplication.
Last edited by steve roy on Sat Jul 21, 2018 6:16 pm, edited 1 time in total.

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Re: Pension Lump Sum: Short-term bonds?

Post by steve roy » Sat Jul 21, 2018 6:11 pm

I’m 9 years older than you, and have been retired 19 months. Two months ago the Mrs. and I sold our abode for a large gob of money. We put 80% of the gob in laddered CDs, Prime Money Market, and short term bonds.

Twenty percent of it we put in Vanguard’s international small cap etf, largely because its valuation is reasonable, and we were light on international equities.

Our asset allocation is 30/70, and with our recent infusion of cash we are now close to that AA. My suggestion would be to set your asset allocation somewhere between 50/50 and 25/75. Few think domestic stocks are going to return a lot over the next 10 or 20 years due to their current price levels, so you might want to consider various overseas indexes that have lower p/e.

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Re: Pension Lump Sum: Short-term bonds?

Post by RetiredAL » Sat Jul 21, 2018 8:41 pm

Diver4242 --

Here's what I did when I retired 2 years ago at 66.

I took my pension as a lump sump, instead of a work sponsored annuity. I chose to fully invest those $ with fairly simple 55/45 equity/bond portfolio, with part of the bonds $ being in ST Treasuries, which is also the withdrawal fund. I set up auto withdrawal equal to what the annuity payment would have been from this ST fund, which is then replenished each 6 months to an 18 month withdrawal $ balance.

2 years later, after 2 full years of withdrawals, that IRA's account balance today is more than one year's worth of withdrawals ahead of the initial balance. Each to his own, but I've greatly benefited from the growth from being a "all in steady Eddie".

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Re: Pension Lump Sum: Short-term bonds?

Post by Tyler Aspect » Sat Jul 21, 2018 8:44 pm

I have been investing for a long time, but I do not pretend to know where the market is going. Having risks being present does not necessarily mean the risks will be realized. If you have a negative outlook of the economy, then you might want to adjust your asset allocation, say from the neutral point of a retiree (50% stock / 50% bond) to a moderately conservative (40% stock / 60% bond) allocation.

100% bond is never recommended, because you could be locked out of the market waiting for a crash that do not occur for many years.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

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Re: Pension Lump Sum: Short-term bonds?

Post by rgs92 » Sat Jul 21, 2018 10:15 pm

Sorry if I sounded hostile or abrupt, I was just trying to help.
Anyway, I can relate to being in shock after an unexpected layoff and wanting to keep your money from evaporating.
Another approach would be to take some of the money, say 50-60% of it and buying an SPIA for secure income.
Then take the rest and put it a somewhat aggressive balanced fund or target fund for growth.

And again, I offer my sympathies fully for what you are going through and really wish you success.

(I myself have some fixed annuities and I agree that having a firm foundation, even one that is not inflation protected, is necessary for sanity.)

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Re: Pension Lump Sum: Short-term bonds?

Post by hawkfan55 » Sun Jul 22, 2018 1:01 am

For example - Extreme uncertainty in so many areas as the county that seems to have lost its collective mind, led by a chaotic government and leader that lurch from one bad decision to another.
Despite somewhat agreement in this statement, we are not allowed to express this type of sentiment on this board.
Please review my logic as far as how to allocate this in the IRA and let me know your thoughts/opinions. Thanks in advance for any help.
So why would I invest in any stocks now, if I believe we're at the top or close, and the mantra is buy low, sell high? Logic tells me to seek safe haven with this money and move it to equities later.
I think you should do what you think is right. If it were me, I might re-evaluate my AA and perhaps move to a little more conservative AA.
Yes, I know trying to time the market is bad, but I feel strongly we're about as high as we're going for a while.
Sounds like you have the knowledge that timing the market is bad. Strong feelings can sometimes get in the way of your knowledge.
I don't need to know the exact bottom, but buying in at any time in a correction is better than buying in now, when I believe we're at the top.
In the meantime, you'll miss out on dividends and possible gains.
So I'm looking at bonds for this money. Since I feel interest rates are going to climb, I would go more short-term, correct?
If you know what interest rates are going to do, by all means, act on it. You might consider short term bonds for money you need to spend during the next 2-3 years and intermediate bonds for money needed 3-7 years from now.
I also believe we're heading for increased inflation, so that would lead me to go with inflation-protected.
Stock funds or ETFs can also provide protection against inflation.
I also think we're heading for recession, so I'm looking at a 5% stake in GLD.
Recessions come and go. Do you really think a 5% stake in GLD is going to make a big difference in your portfolio's overall performance? If so, go for it.

Having the right Asset Allocation is your best move. As you are entering into retirement, you'll want to have an AA that you can live with... then try not to worry about investing and live your best life. Good Luck! :D
Forum Library of Investing Advice: https://www.bogleheads.org/wiki/Main_Page

CurlyDave
Posts: 685
Joined: Thu Jul 28, 2016 11:37 am

Re: Pension Lump Sum: Short-term bonds?

Post by CurlyDave » Sun Jul 22, 2018 1:51 am

Contrary to popular opinion I think the bulls have a much stronger case than the bears.

The primary reasoning is based on a forbidden subject, but the secondary reasoning is that very few are predicting a crash -- only underperformance. And the underperformance has been predicted for the past few years, despite rather nice actual results.

Although I will admit that at 72 I have backed off from 100% stocks to only 97% with several months of withdrawals now in cash in case of a downturn. Of course this cash drag has cost me over the past few months...

Diver4242
Posts: 27
Joined: Wed Jan 03, 2018 4:17 pm

Re: Pension Lump Sum: Short-term bonds?

Post by Diver4242 » Sun Jul 22, 2018 5:51 am

rgs92 wrote:
Sat Jul 21, 2018 10:15 pm
Sorry if I sounded hostile or abrupt, I was just trying to help.
Anyway, I can relate to being in shock after an unexpected layoff and wanting to keep your money from evaporating.
Another approach would be to take some of the money, say 50-60% of it and buying an SPIA for secure income.
Then take the rest and put it a somewhat aggressive balanced fund or target fund for growth.

And again, I offer my sympathies fully for what you are going through and really wish you success.

(I myself have some fixed annuities and I agree that having a firm foundation, even one that is not inflation protected, is necessary for sanity.)
Thanks, rgs92. I'm looking into that. And yeah, somewhat of a shock. Thank you very much for your help and detailed response yesterday.

Diver4242
Posts: 27
Joined: Wed Jan 03, 2018 4:17 pm

Re: Pension Lump Sum: Short-term bonds?

Post by Diver4242 » Sun Jul 22, 2018 5:57 am

Thanks everyone for the great responses. I'm reading up on some bucketing strategies to see if they are a fit with my mindset. For example, one with cash for the next few years, another with the bonds and CD ladders for the intermediate timeframe, and then a third bucket with equities for ten years and out. You folks know the drill. How's that working out for any bucket fans?

rgs92
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Joined: Mon Mar 02, 2009 8:00 pm

Re: Pension Lump Sum: Short-term bonds?

Post by rgs92 » Mon Jul 23, 2018 12:33 am

Sure, good luck again. One fund I like for a pretty safe and more than decent return is FFRHX, Fidelity's floating rate high income fund. The SEC yield is over 4%. It's actually good in a rising rate environment, and doesn't seem to suffer much at all in most cases of interest rate volatility.
I've done well with it in the past few years. It's got a modestly high ER, but that's already factored into the rate.

BigJohn
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Re: Pension Lump Sum: Short-term bonds?

Post by BigJohn » Mon Jul 23, 2018 8:28 am

To each his own but I personally wouldn't consider FFRHX a "safe" bond investment for early retirement. It looks like it's ~90% below investment grade (ie junk) bank notes (not Corporate bonds). In the 2008/09 financial crisis it dropped ~20% while a total bond index fund essentially sailed through.

I'm not saying it's not right for some people at some times. Just my perspective in the context of safe investments in the OP's situation.

retiredjg
Posts: 33540
Joined: Thu Jan 10, 2008 12:56 pm

Re: Pension Lump Sum: Short-term bonds?

Post by retiredjg » Mon Jul 23, 2018 10:29 am

I would not put money that I want to be "safe" in that fund either. It's a junk bond fund which is the only way an intermediate term bond fund is going to pay that high a yield right now (that I know of). And it did take a good dip in the last market downturn -didn't act bond-like at all.

Not saying this fund is inappropriate for anyone at any time, but it does not seem to fit what this poster is looking for in my opinion.

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