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Deferred Comp strategy
Old 01-08-2018, 10:10 AM   #1
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Deferred Comp strategy

Hi. Retired in 2016 at 54, wife retiring next month at 53. Our overall portfolio is currently weighed 70% in low cost, stock index funds.

Deferred comp plan begins distribution in 2018 and will pay all living expenses next 5 years. DC is currently invested in S&P Index funds.

I'm wondering if I should move the deferred comp investments to a more conservative investment structure such as a short term bond fund to ensure stability. Shifting to a more conservative structure seems like a prudent move but i'm not a big fan of bond funds in a rising interest rate environment.

Would appreciate comments/feedback. Thanks
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Old 01-08-2018, 10:20 AM   #2
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I guess it depends on your other retirement funds and your overall desired AA/appetite for risk, but absent more info I would be inclined to dance with the girl that brought you to the dance.
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Old 01-08-2018, 10:24 AM   #3
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Originally Posted by FIREHAPPY View Post
Hi. Retired in 2016 at 54, wife retiring next month at 53. Our overall portfolio is currently weighed 70% in low cost, stock index funds.

Deferred comp plan begins distribution in 2018 and will pay all living expenses next 5 years. DC is currently invested in S&P Index funds.

I'm wondering if I should move the deferred comp investments to a more conservative investment structure such as a short term bond fund to ensure stability. Shifting to a more conservative structure seems like a prudent move but i'm not a big fan of bond funds in a rising interest rate environment.

Would appreciate comments/feedback. Thanks
So just a quick example of my situation. Started my deferred comp two years ago on a ten year payout. It has been in 100% equities until last month when I went 60/40. The result has been my taking out 1/10th and then 1/9th but my total portfolio has actually held pretty steady in total value. This year 1/8th in May and each year the payout increases due to the growth in the fund.

By putting 100% in a conservative you know what you're getting but you're losing in the opportunity to get raises each year it pays off.

Just my opinion.
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Old 01-08-2018, 06:07 PM   #4
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Quote:
Originally Posted by FIREHAPPY View Post
Hi. Retired in 2016 at 54, wife retiring next month at 53. Our overall portfolio is currently weighed 70% in low cost, stock index funds.

Deferred comp plan begins distribution in 2018 and will pay all living expenses next 5 years. DC is currently invested in S&P Index funds.

I'm wondering if I should move the deferred comp investments to a more conservative investment structure such as a short term bond fund to ensure stability. Shifting to a more conservative structure seems like a prudent move but i'm not a big fan of bond funds in a rising interest rate environment.

Would appreciate comments/feedback. Thanks
I will give you the conservative answer: Money needed in the next 5 years should not be 100% equities. I would go with a conservative balanced fund of 30-40% stocks and the rest bonds. Don't be greedy with money you will need in 1 through 5 years. I would even dump it all in a short term bond fund like Vanguard short term investment grade and not feel like I missed the boat. Your long term money in other parts of your AA will take care of growth.

Just my 2 cents worth. I am not a gambler and a pretty boring investor.

VW
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Old 01-08-2018, 06:41 PM   #5
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I moved mine to a 2015 target retirement fund since I will be withdrawing it over next 5 years like you
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Old 01-08-2018, 06:42 PM   #6
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My "deferred comp" (law suit structured settlement) is in a fixed annuity and gives nice steady payouts for a 5 year period.

I guess the true question is what would a 30% reduction in principle between now and your first payment impact your plans for the money?
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