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401K - timing move from stable fund back to bond fund
Old 10-04-2022, 11:45 AM   #1
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401K - timing move from stable fund back to bond fund

Hi all,

There are threads specific to bonds/bond funds/treasuries but none seem appropriate for this particular topic, so here we go.

For perspective, my 401K makes up 52% of my entire nest egg. The AA inside of the 401K is 56/44. (Entire nest egg AA is about 65/30/5.) Options within the 401K are limited. (I can't trade individual bonds.)

A while back, I did move out of an age-based fund into a total stock fund (FSKAX) and stable fund while maintaining the same AA in hopes this would limit losses as bond funds unwind, but I assume at some point, considering the options I do have, getting back into bonds (via the only available bond fund) would be better than sitting in the stable fund.

This is my bond fund option: FXNAX
I've compared to BND and it charts pretty much the same.

Based on the bond/bond fund threads I've been reading, it seems this "golden period for fixed income" was somewhat predictable. Can we somewhat predict when it might be time to move back to a bond fund if the only other option is a stable fund earning barely 2%?

Thanks,
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Old 10-04-2022, 12:16 PM   #2
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If you are not working at the company sponsoring your 401k you can move the $ out of the 401k to a rollover IRA and buy individual bonds.

The stable value fund in my 401k is the only fund (out of ~200 choices) that is not negative YTD.
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Old 10-04-2022, 12:27 PM   #3
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I am still working.

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If you are not working at the company sponsoring your 401k you can move the $ out of the 401k to a rollover IRA and buy individual bonds.

The stable value fund in my 401k is the only fund (out of ~200 choices) that is not negative YTD.
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Old 10-04-2022, 02:40 PM   #4
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I am still working.

I would avoid any bond fund in this rising interest rate environment. The Stable Value fund is better than any bond fund right now.
But you need to look at your entire portfolio. If you have accounts outside of your 401k where you can buy bonds that you can hold until maturity, you should consider putting some of your fixed income allocation there, and increasing your equity allocation in your 401k.
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Old 10-04-2022, 03:46 PM   #5
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Iíve already been buying individual bonds in these other accounts where dollars are available. Reducing dollars in the stable fund and increasing bonds elsewhere beyond what Iíve already done will result in a major tax event if done in my brokerage account or would require me to change a Roth to bonds that is currently all equities, and that would still only be about half of the stable fund. The DW also has a Roth with all equities that could be in play, but holding bonds in Roth accounts seems wrong, but yeah, using both would get me most of the way there.


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If you have accounts outside of your 401k where you can buy bonds that you can hold until maturity, you should consider putting some of your fixed income allocation there, and increasing your equity allocation in your 401k.
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Old 10-04-2022, 03:49 PM   #6
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Iíve already been buying individual bonds in these other accounts where dollars are available. Reducing dollars in the stable fund and increasing bonds elsewhere beyond what Iíve already done will result in a major tax event if done in my brokerage account or would require me to change a Roth to bonds that is currently all equities, and that would still only be about half of the stable fund. The DW also has a Roth with all equities that could be in play, but holding bonds in Roth accounts seems wrong, but yeah, using both would get me most of the way there.

Keeping equities in Roth accounts is wise. Iíd use the stable value fund.
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Old 10-04-2022, 04:16 PM   #7
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Are you absolutely positive your 401k does not allow in-service rollovers? Have you read the Summary Plan Description or Prospectus?
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Old 10-04-2022, 05:15 PM   #8
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I actually started looking into this today, but Iím guessing Fidelity will tell me to talk with our ďplan administratorĒ ó the local HR manager, and sheís not exactly the most competent person Iíve met.

I fear getting to a point of no return and finding out a mistake was made that triggers a huge tax obligation, but maybe I will make some inquiries tomorrow.



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Are you absolutely positive your 401k does not allow in-service rollovers? Have you read the Summary Plan Description or Prospectus?
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Old 10-04-2022, 05:48 PM   #9
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Some 401Ks have a brokerage account option. Two of ours do, so I move money to those and buy Treasuries from there.


When to move back? Keep an eye on yields of the funds vs. Treasuries, the unemployment rate, the Fed minutes / Powell speeches / member interviews, real interest rates and inflation. When the Fed indicates they are done raising rates, unemployment is rising, real interest rates are zero or higher, and the month to month inflation (PCE) is no more than 2% annualized over several months - those are all indicators the Fed won't keep raising rates and inflation is under control.
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Old 10-04-2022, 06:30 PM   #10
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I actually started looking into this today, but Iím guessing Fidelity will tell me to talk with our ďplan administratorĒ ó the local HR manager, and sheís not exactly the most competent person Iíve met.

I fear getting to a point of no return and finding out a mistake was made that triggers a huge tax obligation, but maybe I will make some inquiries tomorrow.
Request the 401K SPD (Summary Plan Description), which likely discusses whether in-service rollovers are allowed.
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Old 10-04-2022, 06:51 PM   #11
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I'm in the same boat with the same bond fund choice. "Brokeragelink" in my Fidelity 401k will not allow for individual bond purchases. For now, I'm holding 900k in Metlife stable value at 1.91%. The new (and hopefully higher) rate will start 1/1/23. My plan is to ride the SV fund until I get the moment you are looking for and then move a percentage to FXNAX.
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Old 10-04-2022, 07:54 PM   #12
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Baserman250, another option is to see if you can take a loan out on your 401K. We've done that, and the "interest" gets paid back to your own account.
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Old 10-04-2022, 10:32 PM   #13
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Originally Posted by baseman250 View Post
I actually started looking into this today, but Iím guessing Fidelity will tell me to talk with our ďplan administratorĒ ó the local HR manager, and sheís not exactly the most competent person Iíve met.



I fear getting to a point of no return and finding out a mistake was made that triggers a huge tax obligation, but maybe I will make some inquiries tomorrow.


Itís very good that you are looking into this. Itís part of DIY culture. You could try your HR plan administrator but sometimes they take the approach that the custodian (Fidelity) is paid to speak to employees. From personal experience, I would suggest asking Fidelity how to get a copy of the SPD or Prospectus. More than once the plan reps have told me I could not do something and I pointed out details in the SPD saying I could. My plan is with Fido also and they are pretty good but they have dozens of plans to monitor. I can access my plan documents from the Fido website.
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Old 10-05-2022, 03:33 AM   #14
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This is my bond fund option: FXNAX
I've compared to BND and it charts pretty much the same.

Based on the bond/bond fund threads I've been reading, it seems this "golden period for fixed income" was somewhat predictable. Can we somewhat predict when it might be time to move back to a bond fund if the only other option is a stable fund earning barely 2%?

Thanks,
You haven't stated your age, or when you might need to use this money for living expenses.

if you don't need the money for at least 5 years, go back to total bond now.
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Old 10-05-2022, 06:10 AM   #15
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I'm 56 and see at least a semi-retirement in no more than 2 years. I have a small "off the radar" income stream that could come close to covering health care premiums, and there will likely be consulting opportunities. Point being, the WR will likely be pretty low at first; especially if the DW continues to work a little longer.



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You haven't stated your age, or when you might need to use this money for living expenses.

if you don't need the money for at least 5 years, go back to total bond now.
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Old 10-05-2022, 06:56 AM   #16
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I would stay away from BND/FXNAX. Passive bond funds like those with such low distribution yields are about to face massive redemptions as interest rates continue to rise. They are in a buy high sell low mode. In the case of BND, it is reaching the point of negative total returns since inception. The price of BND continues to fall, rates are rising, and their distribution yield continues to be pathetically low and even below 1 month treasuries. Then there is the issue of these funds overstating their asset values. Most bonds don't actively trade and some trade only a few times per year. Analysts are now questioning the basis for reporting net asset values. If stable value is your only other fixed income option, I would keep money there until rates stabilize. There is no rational argument for moving money into a bond fund with no capital protection and a distribution yield less than a 30 day treasury or money market fund.
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Old 10-05-2022, 12:14 PM   #17
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It turns out, dollars in my 401k that were rolled over from a previous employer plan are eligible for in-service rollover to an IRA (also in Fidelity) with no paperwork requirements. I was able to do it with a few clicks right on the Fidelity site.

In-kind for now (except for the stable fund, which will go to the FIDO GOV MM Fund I assume). It will take a few days for this transaction to complete.

It represents about half of what is in the stable fund, so I'm good with this; especially considering how easy it was.

Nice!

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Originally Posted by jazz4cash View Post
Are you absolutely positive your 401k does not allow in-service rollovers? Have you read the Summary Plan Description or Prospectus?
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Old 10-05-2022, 12:15 PM   #18
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In the case of BND, it is reaching the point of negative total returns since inception.
One or two more Fed hikes might accomplish that. The five year returns are now at 0%, ten year under 1%.

https://finance.yahoo.com/quote/BND/performance/
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Old 10-05-2022, 02:37 PM   #19
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It turns out, dollars in my 401k that were rolled over from a previous employer plan are eligible for in-service rollover to an IRA (also in Fidelity) with no paperwork requirements. I was able to do it with a few clicks right on the Fidelity site.



In-kind for now (except for the stable fund, which will go to the FIDO GOV MM Fund I assume). It will take a few days for this transaction to complete.



It represents about half of what is in the stable fund, so I'm good with this; especially considering how easy it was.



Nice!


Excellent. Are you using the Fido website? Itís pretty good but 401k rollovers usually require a call. My 2 employer plans plus Roth and t-IRAs all show up when I login.
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Old 10-05-2022, 06:46 PM   #20
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Hi all,

There are threads specific to bonds/bond funds/treasuries but none seem appropriate for this particular topic, so here we go.

For perspective, my 401K makes up 52% of my entire nest egg. The AA inside of the 401K is 56/44. (Entire nest egg AA is about 65/30/5.) Options within the 401K are limited. (I can't trade individual bonds.)

A while back, I did move out of an age-based fund into a total stock fund (FSKAX) and stable fund while maintaining the same AA in hopes this would limit losses as bond funds unwind, but I assume at some point, considering the options I do have, getting back into bonds (via the only available bond fund) would be better than sitting in the stable fund.

This is my bond fund option: FXNAX
I've compared to BND and it charts pretty much the same.

Based on the bond/bond fund threads I've been reading, it seems this "golden period for fixed income" was somewhat predictable. Can we somewhat predict when it might be time to move back to a bond fund if the only other option is a stable fund earning barely 2%?

Thanks,
What a coincidence, today I started doing what you're proposing when I noticed my 401k stable value fund only yielding 0.17 for September. I exchanged all funds from the stable value to an international index fund.

In my Vanguard rollover IRA, I sold the equivalent amount in an international index. With the proceeds I'm planning to ladder short term treasuries up to 2 years but I'm still deciding what percent to put in each rung. Since the settlement fund currently pays a decent rate I'm leaning towards putting equal amounts in the following:

Settlement Fund
3-month
6-month
1-year
2-year
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