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Perfectly Frank 09-04-2017 03:51 AM

Retirement soon, transfer all stocks to stable value fund?
I'm 62 and will retire in 5 years. The total for my 401k and 457 just reached $400,000. I also have a company pension and will receive Social security.

My 401k/457 contains a mix of various stock funds.
For safety, I'm thinking of transferring all of the money into a stable value fund. Future contributions ($15000 per year) will also go to the stable value fund.

I crunched the numbers, and $400,000 into the stable value fund will return about $28,000/year. Add in the $15,000 I put in each year, my 401k/457 would grow by $33,000 per year.

Ok, I would lose out in stock market growth, but gain stability. Good idea or bad?

Boatswain2PA 10-23-2017 08:56 AM

Re: Retirement soon, transfer all stocks to stable value fund?
You certainly sound like you have a risky porfolio now, but that doesn't mean you should COMPLETELY divest yourself.

Other questions that you need to consider: How is your health, what expenses will you have in retirement, how much cash do you have,and how much will your pension/SS be?

The sweet spot in the middle is where you have enough cash, pension and SS to weather a multi-year stock market storm.

If you have a $20K/year pension, $20K/year SS, and you could live on $40K/year during lean years then you are doing very well and should consider keeping much of your portfolio in stocks. In this case, if the stock market turns your $400K into $200K, you're able to weather the storm for 3-4 years until it comes back.

But if your pension is $10K/year, with SS of $20K/year, and you still have mortgage, car payments, etc....thus your annual expenses are $70K/year, then you are in a pickle because you have a $40K/year deficit that would have to be filled by your porfolio. In that case, your $400K porfolio needs to be better protected. You could consider mixing it up, with 1-2 years worth of expected deductions (the $40K/year deficit in my example) held in cash (safe, but negative growth due to inflation), and another 3-4 years of expected deductions held in bonds (also safe, should keep up with inflation), with the rest kept in the market for growth.

Meanwhile, if you're closer to the last example, it's imperative that you find ways to reduce your cost of living. Pay off debts, move to smaller home, etc.

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