Stable Value Fund

[nun]

Do you have access to a "Stable Value" fund in a retirement account and if you do do you use it? I'm retired and even though I have a pension I keep just over 10% of my assets in a 457 stable value fund (@2% return) just in case of an emergency. My 20% bond allocation is from Wellesley and I think of the stable value as a alternative to a short term bond fund allocation.

 

[jazz4cash]

I had a thread on this recently. I am finding less need for my SVF because I have cash alternatives that pay better.


Stable Value Fund Rates

http://www.early-retirement.org/forums/showthread.php?t=84889

 

[VFK57]

My 401K has Stable Value, I think currently it pays about 1.9%. I do keep major portion of my account in it. My wife has similar fund in her 401K plan. Why we selected it while Stock Index Funds have much better return is because we need safe amount no matter what Market condition is when we need income in addition to SS.

 

[pb4uski]

My 401k did not offer a stable value fund, but if it did and it paid ~2% then I would have kept the 401k and used it. I use CD's and target maturity corporate bond ETFs that I intend to hold to maturity as a substitute.

 

[W2R]

Honestly, I don't know. Is the TSP "G Fund" a stable value fund? It is a bond fund guaranteed never to drop in share price, and with a low but predictable yield.

I have my whole TSP in the "G Fund" and get equal monthly payments from it, trying to simulate another pension with it (since my actual federal pension/annuity is so tiny). Access to the "G Fund" was part of my benefits package as a federal employee.

 

[nun]

Honestly, I don't know. Is the TSP "G Fund" a stable value fund? It is a bond fund guaranteed never to drop in share price, and with a low but predictable yield.

Sort of, but better IMHO....the G-Fund invests in short term US Government debt and is guaranteed by the US Government.


Stable Value funds invest in short to mid term Government and Corporate debt
and they use commercial insurance to protect agains losses....although they are not guaranteed they are low risk.

 

[DrRoy]

Yes, I do, and it pays the same as yours. I use it as a hybrid cash/bond allocation.

 

[Cobra9777]

DW had access to one in her 457b but it yielded 1.7% with a very high ER and lots of weird trading restrictions. Plus her account was administered by a really sketchy firm that required faxed paper forms to make even simple changes. She just retired and we rolled it into a Fidelity IRA as fast as we could. We thought about leaving some portion behind for access to the SVF, but given all the above, we'd rather have access to the whole universe of low-cost investment choices at Fidelity.

Our fixed income allocation consists of AGG, LQD, HYG, and BNDX. Average annual total return last 3 years is 3.1%, yield is 3.2%, and duration is just under 6. With the sharp growth in stocks and real estate, our fixed income allocation is now down to 27%. So, not a ton of exposure and I'm not rebalancing back into bonds right now. Those funds may take a beating next several years as rates rise; I have no idea. But they're all in tax-deferred accounts that we won't access until RMDs at 70, which is 15 years from now. I'm sure there will be many zigs and zags between now and then. So we're just staying the course.

 

[topsider]

Retired DW has about 5% in a 457b stable value fund paying 3.5% guaranteed minimum. She just left the money in the account because nothing else paid that much. We do not need the money right now, so letting it slow-grow is fine. If she doesn't touch it, she has a one time remaining option to apply it to her state annuity. We'll make a call when we get to a fork in the road.

 

[Hermit]

When I was told my house would cost about double the original estimate, I moved funds to the stable value fund in my 401k so I would have access to it no matter what happened in the market. It does not pay very much, but that was not the point at the time. I have since lowered the amount some and will not need it for construction, but I am not too crazy about moving money back into an all time high market.

 

[RetireAge50]

We are about to retire and my current thought is to keep approximately 2 years of cash needs in the stable value fund in my 401K. If we sell stocks in an after tax or other account for expenses we will buy the same amount of stock in the 401k. The net effect will be a sale of the stable value fund and no change in stock holdings.

 

[Lakewood90712]

Retired DW has about 5% in a 457b stable value fund paying 3.5% guaranteed minimum. She just left the money in the account because nothing else paid that much. We do not need the money right now, so letting it slow-grow is fine. If she doesn't touch it, she has a one time remaining option to apply it to her state annuity. We'll make a call when we get to a fork in the road.

Wow that a great rate, or it's a risky fund.

Most SV Funds, including the ones in my 457 and 401K plans, are about 2%

 

[Big_Hitter]

I've got one that returned about 2% last year. I'm thinking about re-balancing a chunk of my equities into it actually.

Right now I have about a fourth of my k balance in it.

 

[nun]

We are about to retire and my current thought is to keep approximately 2 years of cash needs in the stable value fund in my 401K. If we sell stocks in an after tax or other account for expenses we will buy the same amount of stock in the 401k. The net effect will be a sale of the stable value fund and no change in stock holdings.

I retired 3 years before my pension started and so I decided to sell some intermediate bonds and put the proceeds in a stable value account so that I had enough very low risk fixed income to cover at least 3 years of spending and any emergencies. Now that my pension has started I'm not as concerned about needing to spend the SV money and I'll just use it to rebalance when the stock bubble bursts.

 

[Koolau]

If no one has guessed yet, I consider myself a very conservative investor. So I too left my stable value fund alone (in my 401(k) from Megacorp). It only gets about 2% as others have mentioned. So, I'm leaving money on the table, most years. But, during the great recession, my SVF was one of the reasons I didn't lose any net worth (other reasons were my small commitment to precious metals and some other "cash like" products which continued to earn 4+%.) No brag, just fact. SO, since the recession turned around, I've not gained like many of the folks here who were "all in" on stocks. Of course, I didn't have any losses to "come back from" either. I only have about 30% in stocks right now. With my "guaranteed" sources of income (modest pension, very nice SS check(s)) plus my conservative portfolio, I seem to be good to go to age 100 unless inflation rears its ugly rear.

I don't recommend this particular approach to investing, but it seems to work for me. I saved more than I needed, so why take too many chances going forward since I seem to have enough to more than meet my life-style needs. As always, YMMV.

 

[Jackanory]

I'll just use it to rebalance when the stock bubble bursts.

Umm, wouldn't it be better to rebalance before the stock bubble bursts?

I just rebalanced last week, and was looking for options for my increased cash position. Is there an equivalent to your 2% fund in either Fidelity or Vanguard?

 

[Koolau]

I just rebalanced last week, and was looking for options for my increased cash position. Is there an equivalent to your 2% fund in either Fidelity or Vanguard?

I work with Vanguard and have not seen anything like a Stable Value Fund or Guaranteed Income Fund. I suppose they may exist SOME place outside of a 401(k) or equivalent, but I've never heard of one. YMMV

 

[Jackanory]

My 401K was closed within days of retirement, as the company had moved to Merrill Lynch from Fidelity at some point prior!

 

[Fedup]

I still have my husband's TSP account open. Just in case I need access to G fund. So far I've earned more than G Fund with much greater flexibility.

 

[euro]

Do you have access to a "Stable Value" fund in a retirement account and if you do do you use it? I'm retired and even though I have a pension I keep just over 10% of my assets in a 457 stable value fund (@2% return) just in case of an emergency. My 20% bond allocation is from Wellesley and I think of the stable value as a alternative to a short term bond fund allocation.

Yes, I have access to one via my former mega's 401k. Pays 3% currently. I do use it for a good part of my "cash"

 

[Trooper]

Is there an equivalent to your 2% fund in either Fidelity or Vanguard?

Stable Value funds are typically only offered in 401(k) plans. I believe that's because the outflows are less volatile.

My 401(k) through Fidelity offers one paying about 1.9% with an ER of 0.31%. It's administered by BNY Mellon.

I haven't used it yet but plan to soon, as a safe haven for near-term cash needs. I'll likely fund it from the bond index fund that I'm in.

 

[brewer12345]

Expense ratios for SVFs are meaningless, just look at the yield.

 

[Trooper]

Expense ratios for SVFs are meaningless.

Why is that? Is it because the yield is net of the ER?

 

[brewer12345]

Why is that? Is it because the yield is net of the ER?

Correct. All you can ever expect from a SVF is the yield, no more, no less. Yields are quoted net of fees/expenses and offer a very simple way to decide whether the fund is attractive or not. The gain or loss of the underlying bonds is not your problem as an investor.

 

[jollystomper]

My 401K offers a stable value fund. Over the last 10 years the lowest yearly return has been 2.71%, so I have parked a lot of money into it.

The last 2 years (2015 and 2016) the yield rose to 3.01% and 3.13%. If that trend continues, with my forecast retirement SWR to be under 3%, it is tempting to move all of my 401K into that fund.