Pension curveball (new advisor, new recommendation)

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Bacardi
Posts: 14
Joined: Fri Feb 02, 2018 9:16 am

Pension curveball (new advisor, new recommendation)

Post by Bacardi »

Hi all,
First some background.
I recently met with my STRSOH (State Teachers Ohio) pension advisor as I am nearing retirement. I’m in what is known as the “Combined plan” where I self-direct one pool of funds, the State manages the other pool (known as the Defined Benefit) of funds.
During this meeting, the adviser recommend I keep the “Defined Benefit” part of the monthly benefits with the state so I could access additional benefits such as subsidized health care, (and now the curve) and move my self-directed portion to another investment. No other STRSOH advisor has recommended this move.
His rational to move the self-directed portion:
1) He mentioned that if I left the funds with the state, once my wife and I die, no funds would go to any beneficiary unless I took the 7 or 15 year guarantee option. Based on family genetics, it would appear I should live (God willing) more than 15 years and neither my wife nor I have children.
2) He said there more than a few “Stable Value funds out there offering 5 and 6% rates”.
3) He mentioned a 17.86 year breakeven. He calculated this by taken the account balance (335K) and dividing it by the yearly benefit (19K). Any monthly income past the breakeven is gravy.
It appears the payout ratio (or Pension Income Ratio) of the Self-directed pension to be 5.6% if my math is correct.
My questions are these:
Is my math correct on the payout ratio? If so, it appears I cannot get near this rate when shopping SPIA’s on immediate Annuity, Blueprint income, or the like.
Where are these Stable Value % to 6 % yielding funds? Does the average Joe have access to them or are they imbedded in other non-accessible Pension Plans.
As for existing alternatives to place the self-directed funds, I am currently invested in OHIO 457 (Blackrock LifePath 2025) and 403b (TIAA (Traditional, CREF Eq. Indx, and CREF Global Equities)
Another option would be to do a Backdoor Roth, but can it “guarantee” a 5 to 6% payout over the next x years without any action I my part.
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FiveK
Posts: 11105
Joined: Sun Mar 16, 2014 2:43 pm

Re: Pension curveball (new advisor, new recommendation)

Post by FiveK »

Bacardi wrote: Wed Apr 07, 2021 2:21 pm He said there more than a few “Stable Value funds out there offering 5 and 6% rates”.
Stop there and ask him, "For example?"

Let us know the response....
dukeblue219
Posts: 1293
Joined: Fri Jan 29, 2016 12:40 pm

Re: Pension curveball (new advisor, new recommendation)

Post by dukeblue219 »

Bacardi wrote: Wed Apr 07, 2021 2:21 pm
Another option would be to do a Backdoor Roth, but can it “guarantee” a 5 to 6% payout over the next x years without any action I my part.
Sure, for x less than about 23 it should be fine if you can earn 1% real or better. Guarantee? No. Without touching the principle heck no!
ralph124cf
Posts: 2670
Joined: Tue Apr 01, 2014 11:41 am

Re: Pension curveball (new advisor, new recommendation)

Post by ralph124cf »

FiveK wrote: Wed Apr 07, 2021 3:02 pm
Bacardi wrote: Wed Apr 07, 2021 2:21 pm He said there more than a few “Stable Value funds out there offering 5 and 6% rates”.
Stop there and ask him, "For example?"

Let us know the response....
And don't let him show you a backtest for the last ten or twenty years. There are many bond-like investments that have returned 6% or better over the last twenty years that are paying maybe 1% now.

I don't know how but he will try to cheat you. Place your hand firmly on your wallet, and back away.

Ralph
tibbitts
Posts: 13272
Joined: Tue Feb 27, 2007 6:50 pm

Re: Pension curveball (new advisor, new recommendation)

Post by tibbitts »

Well obviously everybody wants to know what investment is guaranteed to return 5-6%. Obviously since it's a stable value fund it must be some kind of annuity product. I will say that many years ago I bought an annuity product that was guaranteed to produce 6% for the duration of its deferred sales charge, which I thought was a good deal even compared to the higher interest rates of the era. I doubt there are such products now but mine worked out well for me.
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