Deferred Comp - Need to take out in 5 years

[MN_1021]

Hello Everyone,

I am going to start by saying that I understand that everyone's risk profile and risk appetite is different. However, I wanted to get a general opinion on how this esteemed group will handle the following situation:

Age 45, Wife 44. Will like to retire in between 50 & 53. We have other assets apart from 457B but my question is specific to 457B.

I am in middle of switching jobs and my current employer allows me to take my 457B out in chunks of 5 years (monthly disbursements). I have decided to take those disbursements when I am 50- so starts in 2024.

I have about 85K in it- currently all stock based mutual funds. Again, not trying to time the markets but would appreciate any guidance on how I should change my AA to minimize my losses if the markets were to tank. Please be specific.

Thoughts?

 

[Bamaman]

Most people your age would be playing the equities moderately aggressive. You don't say if you're 457B is from a governmental or non-governmental employer. Money deferred into non-governmental 457 plans may not be rolled into any other type of tax-deferred retirement plan. Are the funds allowed to be rolled over into an IRA Rollover--rather than be withdrawn and taxes paid over 5 years? Keeping the funds in tax deferred as long as possible would be attractive to most people if you don't need the funds immediately.

 

[FlaGator]

Hello Everyone,

..........
I am in middle of switching jobs and my current employer allows me to take my 457B out in chunks of 5 years (monthly disbursements). I have decided to take those disbursements when I am 50- so starts in 2024.

I have about 85K in it- currently all stock based mutual funds. Again, not trying to time the markets but would appreciate any guidance on how I should change my AA to minimize my losses if the markets were to tank. Please be specific.

Thoughts?

If I understand correctly, you have ~$17,000 coming out for each of 5 years, beginning 5 years from now. So, the 2024 money has 5 years to be invested, and the 2029 distribution has 10 years.

From what I have seen, "the market" will be about even or higher after 7-8 years (any downturns are eventually covered by subsequent gains).

If your goal is mostly preservation, I would convert the first 2-3 years of distributions to short- to intermediate term bonds, let the balance ride in equities, and annually convert another year's worth to fixed income. In 2-3 years you'd be 100% bonds.

If your goal is exclusively preservation, I'd move it all in the bonds now. You could adjust equity positions in your other holdings to maintain your desired allocation.

 

[Tiny Kingdom]

Retired in December at 51.5 with $52k in a 457 that I intended to use to help bridge the first three years to 59.5. About six months before retirement, I moved it all to bonds. That sounds conservative, but my overall portfolio was 70/30-ish. YMMV, but you said specific. In your case, I'd probably dial back the risk some to 70-80% equities for the first 4-5 years and then start moving it toward something more conservative around 40-50% ish.

While I "intended" to use it over three years, it took four sets of forms (partly my errors and partly incorrect information from them) and a jillion phone calls to customer service to get a check. I gave up getting multiple payments and decided to take it all and bid AIG/Valic farewell. During this time, they had a computer change which cut off access to my account online in March. They never got this resolved. Since I ended up taking a lump, 100% bonds was a fine choice.

Moving it, since that was mentioned above...moving it to an IRA would eliminate the main advantage IMO of a 457 which is the ability to access the funds without penalty prior to 59.5.