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  • Pensions & Asset Allocation

    Hi All,

    I’m am a graduating fellow who will be taking a job at a public hospital with a pension, 403b, 457 and HSA. My question is this: how should my pension influence my asset allocation?

    I am tempted to weight it similar to bonds. Also, I do not have access to decent bond funds. My plan, as it currently stands is to save approximately 20% of pretax income between my savings and employer match (including an HSA, but not counting the pension) and put 100% into equities with some spread between full index, small cap and international as there are decent choices for these classes, then maybe HSA into a REIT or just more index.

    I will be fully vested in the pension after 10 years. My thought is that bonds should not play a big role in the early part of my career as I have time to recoup losses from corrections/bear markets. If I leave before 10 years, which I don’t anticipate, I can swing some money from equities into bonds. If I stay past vesting, I can continue to put 100% of my contributions + match into equities and have the pension count as my bond portion.

    Other potentially pertinent info: student loans paid off, small emergency fund (a few thousand, will probably be depleted for moving/start up in new city), about 30k in retirement savings thusfar (vanguard target), nonworking spouse who stays at home with our infant. We will be moving. Don’t own a home. No car payment. Have considered buying a “starter house” for 200-300k with a doctor loan vs. renting for 1-3 years to save up for a home down payment.

    Thanks!!

  • #2
    RENT!!  Congrats on no loans.  Work on retirement savings.  Open a 529.  Buy in a few years.  Save for a down payment and make sure you like your job.....

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    • #3
      Given you are 10 years until vesting, I would value the pension at zero until you are fully vested.  That being said, if you are in your early mid 30's, I would also tend to be very aggressive in an asset allocation and trend towards 100% equities.    The question then becomes one of tilt (small/mid caps) versus simplicity.  If the age I have 'assigned' is correct, I would tend towards a tilt towards small/mid.

      You don't discuss risk tolerance, but a high equity portfolio also needs to be paired with a high risk tolerance and the potential pain along the journey.  Maximize your HSA contribution.  A unique animal, and the earlier you save and generate financial leverage in an HSA, the better imo.

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