Move to safer investments

[GenXguy]

1. You should not expect any notification that the rate on your stable value fund is changing.

That's neither here nor there at this point. But this fund was advertised to as a "fixed interest fund" that pays 3%. It has never been referred to as a stable value fund or a variable interest fund. They sent out a letter to all employees that gave the percentage rate over a decade ago which hadn't changed for over a decade. When they lowered it, crickets. And if you read my previous comments, you will note that they started charging plan admin fees on the fund when the booklet I received specifically excluded the fixed interest fund from admin fees. So they definitely should have let employees know they were changing the rules on that. I bet some still don't have a clue because they follow their investments so carefully as I do.

2. The reduction in the rates does not mean the funds are “less safe”. If anything they are trying to maintain the risk level of the fund.

No, they actually said it's a different fund and that the original fund isn't even available anymore. But whatever. If they had just pulled this stunt a few years earlier, I wouldn't be dealing with it now because I would have stayed in 100% stock funds.

 

[Koolau]

The "value" of the fund is definitely not stable. It's losing value quickly due to inflation, which is why I'm trying to time my moves out. It's unfortunate they put me in this situation by slashing the interest rate and starting to charge plan administration fees on it after 10+ years at 3% and no fees.

Okay, yes, like any other fund denominated in dollars, the actual "value" goes down during inflation. Same with MYGAs, savings accounts, CDs, check books, etc., etc. But, then again, it's the same with equity funds that don't expand as quickly as the rate of inflation.

The "stable" in stable value means that the NOMINAL value will not go down. The interest rate WILL fluctuate. If you check the nominal value every day, you won't find the value going down. It will virtually always go up.

People like SVF BECAUSE they don't go down (yes, nominally.) Is that a good reason to buy one? That's something each of us have to answer for ourselves. You're not gonna get 'rich' with an SVF but at least as you're watching your equities drop (maybe) 50% (nominally) your SVF will inch up (nominally).

I have an SVF but don't necessarily recommend SFV for others because YMMV.

 

[NW-Bound]

I don't keep money in a SVF to have gains. It's the safety money to keep me from having to sell stocks in a prolonged bear market. I look at my I-bonds the same way.

So far, I survived 2 bad bear markets and did not have to touch any of these life-saving assets. I did spend my cash though.

Now, my portfolio is bigger than it was in previous market downturns, and the total of dividends, interests, and SS is now more than my expenses. Theoretically, I can be 100% in stocks and can survive. But 100% stock just does not feel right to me, I don't know why.

 

[Spock]

I've been 100% in my 401Ks Stable Value fund since 2008 and the interest rate has been slowly dropping (now at 2.14%). The 401K does not have any "cash" options.

In the last week I've been contemplating the previously unthinkable... close out my 401K, permanently losing access to my formerly loved SVF, and rolling to an IRA to ladder in CDs at ~3-3.5%. SVF has always been slow to raise rates and I expect everything will raise even slower this cycle as the prevailing bets are that the fed will cut rates sooner rather later regardless of where inflation is at... if the SVF rate rises at all it will start sinking again shortly. I don't expect my SVG to ever get back to 3%. I guess it's time to build yet another spreadsheet to figure out a breakeven point between the two curves.

 

[npage]

I've been 100% in my 401Ks Stable Value fund since 2008 and the interest rate has been slowly dropping (now at 2.14%). The 401K does not have any "cash" options.

In the last week I've been contemplating the previously unthinkable... close out my 401K, permanently losing access to my formerly loved SVF, and rolling to an IRA to ladder in CDs at ~3-3.5%. SVF has always been slow to raise rates and I expect everything will raise even slower this cycle as the prevailing bets are that the fed will cut rates sooner rather later regardless of where inflation is at... if the SVF rate rises at all it will start sinking again shortly. I don't expect my SVG to ever get back to 3%. I guess it's time to build yet another spreadsheet to figure out a breakeven point between the two curves.

For some reason I never thought to put brokered CD's on my IRA. I've picked up a couple recently at 3% in taxable account. Spreadsheet cannot capture the secure feeling. I never really count on the cash/bond allocation of my stuff making more than 3% so these are looking pretty good right now.