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What asset class is my Cash Balance Fund?
06-06-2018, 09:29 AM
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#1
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Recycles dryer sheets
Join Date: Mar 2016
Location: Goodyear
Posts: 88
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What asset class is my Cash Balance Fund?
My state government employer offers a guaranteed cash balance fund of 5% ....
Members who participate in Cash Balance do not make investment
choices for either member or employer contributions. The rate of return for
Cash Balance accounts is not tied to investment performance. Cash Balance participants are guaranteed a rate of return (“Interest Credit Rate”) on their accounts based on the federal mid-term rate plus 1.5%. When the federal mid-term rate falls below 3.5%, members receive a 5% minimum credit rate.....
It also can provide for dividends based on performance, 2017 dividend yield is 5.46%. I am 63 and can keep this fund until I am 70. I would like to included this fund amount in portfolio asset allocation tools, Flexible Retirement Planner, Portfolio Visualizer, etc. It is 20% of our nest egg. What do I call it?
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06-06-2018, 09:37 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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Fixed income.
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06-06-2018, 09:38 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Oct 2009
Posts: 2,107
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Sounds similar to a stable value fund, only better. I designate my stable value fund as cash in my asset allocation.
__________________
“Of all the paths you take in life, make sure a few of them are dirt.” John Muir
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06-06-2018, 09:42 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,264
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Quote:
Originally Posted by LOL!
Fixed income.
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+1... with no interest rate risk and an attractive yield.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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06-06-2018, 10:15 AM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,229
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Quote:
Originally Posted by MuirWannabe
Sounds similar to a stable value fund, only better. I designate my stable value fund as cash in my asset allocation.
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Agree sounds like a better version of a SV fund, but better.
However, I classify my SV fund as Fixed Income. The rate is 3.84%, which is more in line with composite type CD rates which many use as a fixed income allocation.
I could see it either way though.
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TGIM
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06-06-2018, 11:29 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,264
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+1.... I think of it as fixed income rather than cash.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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06-06-2018, 12:10 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Oct 2009
Posts: 2,107
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Quote:
Originally Posted by Dtail
Agree sounds like a better version of a SV fund, but better.
However, I classify my SV fund as Fixed Income. The rate is 3.84%, which is more in line with composite type CD rates which many use as a fixed income allocation.
I could see it either way though.
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I see the point. I’ll consider adjusting how I view it in my AA.
__________________
“Of all the paths you take in life, make sure a few of them are dirt.” John Muir
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06-06-2018, 12:29 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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Cash suggests complete liquidity to do anything that one wants to with the value. Fixed income suggests less liquidity than cash. I think the OP's money in this fund is less liquid than cash.
OTOH, this fund won't go down in value I think. So if one is using those allocation tools, see if they allow a fixed annuity as an option for input.
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06-06-2018, 02:29 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Location: St. Charles
Posts: 3,903
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Per Wikipedia:
The "traditional" asset classes are stocks, bonds, and cash:
Stocks: value, dividend, growth, or sector-specific (or a "blend" of any two or more of the preceding); large-cap versus mid-cap, small-cap or micro-cap; domestic, foreign (developed), emerging or frontier markets
Bonds (fixed income securities more generally): investment-grade or junk (high-yield); government or corporate; short-term, intermediate, long-term; domestic, foreign, emerging markets
Cash and cash equivalents (e.g., deposit account, money market fund)
Since stocks and bonds both the risk the value of the invested amount, I tend to consider all guaranteed principal investments as cash. So I would consider the OP's "cash balance account" as cash. In my mind, cash is what I can access, with no losses, and without selling on the secondary market, if TSHTF. (yes, I know some CD's, if sold shortly after purchase, can result in a minor loss in principal, but at least that is defined amount, not a market risk)
Not that it really matters, as long as YOU know how you are accounting for it.
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If your not living on the edge, you're taking up too much space.
Never slow down, never grow old!
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06-06-2018, 02:59 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,229
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Does OP care about the classification in terms of how it would be classified for example in various retirement calculators, where one can segregate Fixed Income vs. Cash allocations?
Edit - I see this is the main reason for the request.
__________________
TGIM
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06-06-2018, 05:31 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Oct 2017
Location: Tellico Village
Posts: 2,607
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Quote:
Originally Posted by RHONDAVE
My state government employer offers a guaranteed cash balance fund of 5% ....
Members who participate in Cash Balance do not make investment
choices for either member or employer contributions. The rate of return for
Cash Balance accounts is not tied to investment performance. Cash Balance participants are guaranteed a rate of return (“Interest Credit Rate”) on their accounts based on the federal mid-term rate plus 1.5%. When the federal mid-term rate falls below 3.5%, members receive a 5% minimum credit rate.....
It also can provide for dividends based on performance, 2017 dividend yield is 5.46%. I am 63 and can keep this fund until I am 70. I would like to included this fund amount in portfolio asset allocation tools, Flexible Retirement Planner, Portfolio Visualizer, etc. It is 20% of our nest egg. What do I call it?
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I would call it a blessing!! Keep it as long as you can and call it fixed income.
Congrats,
VW
__________________
Retired May 13th(Friday) 2016 at age 61.
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