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Stable value fund and 457, excellent fixed income reserve
Old 11-15-2013, 11:40 AM   #1
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Stable value fund and 457, excellent fixed income reserve

Coming up to ER I've been looking at my asset allocation for the 7 years until I hit 59.5. I want to have enough money in cash/cash like funds to cover my expenses until I can easily access my IRAs, just in case I have to live through a protracted downturn. So the stable value fund in my 457 plan is grest for this.

The 457 plan allows money to grow tax deferred and also allows for penalty free withdrawals as soon as I leave my job. Income tax is due on those withdrawals.

The stable value fund is currently paying 2.6% interest (and will pay more when interest rates go up) with very little risk to principal..........

So tax deferral on gain, high interest, low risk to principal and ease of access look like a winning combination.
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Old 11-15-2013, 11:52 AM   #2
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Quote:
Originally Posted by nun View Post
Coming up to ER I've been looking at my asset allocation for the 7 years until I hit 59.5. I want to have enough money in cash/cash like funds to cover my expenses until I can easily access my IRAs, just in case I have to live through a protracted downturn. So the stable value fund in my 457 plan is grest for this.

The 457 plan allows money to grow tax deferred and also allows for penalty free withdrawals as soon as I leave my job. Income tax is due on those withdrawals.

The stable value fund is currently paying 2.6% interest (and will pay more when interest rates go up) with very little risk to principal..........

So tax deferral on gain, high interest, low risk to principal and ease of access look like a winning combination.
I was going to do the same thing when I retired. Everything else was going
to Vanguard. But the people that made the decisions decided it was "better" if we got a below market short term bond fund that paid a lot less than the stable value fund, so I ended up transferring everything to Vanguard.
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Old 11-16-2013, 06:52 AM   #3
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We're doing similar, planning on using wife's 457 as quasi-IRA and at least pull enough out annually between ER and 59 1/2 to cover the free income tax tiers via std deduction and exemptions.

Also same we're using the 457's stable value found (2.5%) but just as a temp replacement for our overall bond allocation since unappealing bond fund times. Still trying to work out the most advantageous way tax-wise to handle our income needs between taxable investments and 457, with an eye towards ACA subsidies and possibly Roth conversions.
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Old 11-16-2013, 07:55 AM   #4
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The stable value fund at my workplace has been steadily dropping. It's now down to 2.0%. I've got too much in that fund now, but with stocks so high, it's hard to move to equities. Going to be a little painful to see the reports when it drops below 2%....

So much for me being safe this year. Of course, if the market corrects in the Spring, I'll feel better.
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Old 11-16-2013, 09:25 AM   #5
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Of course, if the market corrects in the Spring, I'll feel better.
Love that feeling eh?

Yay I win... because... I didn't lose!
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Old 11-16-2013, 03:08 PM   #6
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Quote:
Originally Posted by Masquernom View Post
The stable value fund at my workplace has been steadily dropping. It's now down to 2.0%. I've got too much in that fund now, but with stocks so high, it's hard to move to equities. Going to be a little painful to see the reports when it drops below 2%....

So much for me being safe this year. Of course, if the market corrects in the Spring, I'll feel better.
I compare my stable value fund to things like CDs and short term bonds. It's liquid, gets very competitive interest rates and is pretty secure. I think it beats CDs and short term bonds hands down
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Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
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