The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Aggie1999 on January 25, 2017, 10:50:21 AM
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Should a company pension balance with a guaranteed return of 4% or more per year (realistically 4%) be counted towards the bond part of someone's asset allocation, assuming the pension balance will be rolled over to a tIRA? If the pension balance is more than what the bond allocation would be in your overall AA would everything in 401k, IRA's, etc go only in equities?
Here's some more details of my specific circumstances for my above questions:
- If used as a normal pension plan where I get monthly payments that would be over 20 years from now for me.
- Most likely I will be leaving the company within 2 - 3 years so my thought is it would be much better to roll the pension balance over to a tIRA for the average 7% earnings vs the 4% earnings I now currently get in the pension. I would do this immediately after leaving the company.
- My pension balance is only increasing by the earnings. The company stopped adding additional money/credits to it years ago.
Thoughts?
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I don't have a mathematical answer for you, but my GF has a decent DB gov't pension coming her way so when we picked her portfolio we left out the bonds. Her pension will cover all her essential costs so her investments are just for lifestyle upgrades. She also started saving later in life so to hit the target $$ value she'd prefer running with higher equities makes sense for her.
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If you take it as an annuity, then yes, it's reasonable to count it as a bond allocation.
If you're taking a lump sum, then no. Treat it like you would any other retirement funds.