Would you choose bond or "real 3%" investment if you were me?

[Anonymous]

I would put 100 percent of my bond allocation in it. In fact, I would underweight equities given this opportunity.

[Anonymous]

Anonymous wrote:

Anonymous wrote:PP here - old thread, but relevant now as much as it was then (in case you just want to know the bottom line, they said the world bank real + 3 is just hard to beat, so go for it)

https://www.bogleheads.org/forum/viewtopic.php?t=156274

Thanks PP for finding this thread for me ! This is perfect. And yes to others who asked: it is the World Bank CPI+real 3% option, no fee, and it is probably subsidized/guaranteed by something else. i dont have much doubts that it is extremely safe.

I thik i am going to put 100% of my bond allocation into it. My only doubt now is whether 90% stocks/ 10% Real 3% makes sense.. Maybe the real 3% is so good I should do 80/20 or 70/30 instead? WWYD?

keep your allocation to 10%. split the remaining 90% between the S&P and Russel 2k - you want to take full advantage of the last 2 months of the year where the market traditionally rises. Keep an eye on the Fed decision regarding rates too. You can always [self] correct the allocation every month, you just need to pay attention to what's going on and the calendar (you have the adjust the allocation before the final day of the month in order for the changes to be reflected the very next month). So you've missed the opportunity to adjust for November but you can still adjust for December.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I can't believe no one has asked what magical investment offers a guaranteed 3% real return and what risks/catches go along with it.

OP here, so it is not Bernie Maddoff option 😄. It is the retirement fund managed by our World Bank colleagues. Not sure how they manage to guarantee that return but basically it replaces the old pension model (which if you think about it was also based on pension managers thinking they could get an average guaranteed return).

There is a cap in terms of how much money we can put into the real 3% option (11% of our net salary)

the cap of 11% of [net] salary is not limited to the 3% option only. the 11% (Bank contributed a matching 10%) is the current maximum we can contribute to our cash benefit component in the pension. therefore, whatever you chose impacts up to 21% of your salary (your 11% plus the 10% contribution from the Bank). the defined benefit is not impacted by your investment decisions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP here - old thread, but relevant now as much as it was then (in case you just want to know the bottom line, they said the world bank real + 3 is just hard to beat, so go for it)

https://www.bogleheads.org/forum/viewtopic.php?t=156274

Thanks PP for finding this thread for me ! This is perfect. And yes to others who asked: it is the World Bank CPI+real 3% option, no fee, and it is probably subsidized/guaranteed by something else. i dont have much doubts that it is extremely safe.

I thik i am going to put 100% of my bond allocation into it. My only doubt now is whether 90% stocks/ 10% Real 3% makes sense.. Maybe the real 3% is so good I should do 80/20 or 70/30 instead? WWYD?

keep your allocation to 10%. split the remaining 90% between the S&P and Russel 2k - you want to take full advantage of the last 2 months of the year where the market traditionally rises. Keep an eye on the Fed decision regarding rates too. You can always [self] correct the allocation every month, you just need to pay attention to what's going on and the calendar (you have the adjust the allocation before the final day of the month in order for the changes to be reflected the very next month). So you've missed the opportunity to adjust for November but you can still adjust for December.

Thanks ! I did change it right before nov 1st to 10% to the real 3%. From all of what you are saying i am assuming you also work at the Bank? May i ask your age and allocation ? And how long you have been invested the way you are?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I can't believe no one has asked what magical investment offers a guaranteed 3% real return and what risks/catches go along with it.

OP here, so it is not Bernie Maddoff option 😄. It is the retirement fund managed by our World Bank colleagues. Not sure how they manage to guarantee that return but basically it replaces the old pension model (which if you think about it was also based on pension managers thinking they could get an average guaranteed return).

There is a cap in terms of how much money we can put into the real 3% option (11% of our net salary)

the cap of 11% of [net] salary is not limited to the 3% option only. the 11% (Bank contributed a matching 10%) is the current maximum we can contribute to our cash benefit component in the pension. therefore, whatever you chose impacts up to 21% of your salary (your 11% plus the 10% contribution from the Bank). the defined benefit is not impacted by your investment decisions.

Sorry you are correct, i was oversimplifying, equivalent 21% net salary indeed.

What i had in mind when speaking of caps was my own direct contributions as there is also the 401K Roth option that I contribute to as a G4 visa, and which doesnt have the real 3% option. I cant keep adding to the real 3% when i increase my retirement contributions overall in the options offered through the World Bank (so including the 401K).

[Anonymous]

Another WBG staff member. Real 3 all the way. 50 years old.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP here - old thread, but relevant now as much as it was then (in case you just want to know the bottom line, they said the world bank real + 3 is just hard to beat, so go for it)

https://www.bogleheads.org/forum/viewtopic.php?t=156274

Thanks PP for finding this thread for me ! This is perfect. And yes to others who asked: it is the World Bank CPI+real 3% option, no fee, and it is probably subsidized/guaranteed by something else. i dont have much doubts that it is extremely safe.

I thik i am going to put 100% of my bond allocation into it. My only doubt now is whether 90% stocks/ 10% Real 3% makes sense.. Maybe the real 3% is so good I should do 80/20 or 70/30 instead? WWYD?

keep your allocation to 10%. split the remaining 90% between the S&P and Russel 2k - you want to take full advantage of the last 2 months of the year where the market traditionally rises. Keep an eye on the Fed decision regarding rates too. You can always [self] correct the allocation every month, you just need to pay attention to what's going on and the calendar (you have the adjust the allocation before the final day of the month in order for the changes to be reflected the very next month). So you've missed the opportunity to adjust for November but you can still adjust for December.

Thanks ! I did change it right before nov 1st to 10% to the real 3%. From all of what you are saying i am assuming you also work at the Bank? May i ask your age and allocation ? And how long you have been invested the way you are?

PP here (and also offered the clarifying post about the pension) - yes, I'm a fellow colleague and have been with the Bank for more than 22 years. I'm in the new plan and when I started, we could only contribute 5% of our salary instead of the current 11%. I was fortunate to have been able to make the additional contributions over 5 years during the "catch up period" that was part of the most recent pension reform. I just turned 50 last month and hold a pretty senior position in the Bank.

I would have to go back and check for the exact information on my history of allocations, but roughly, I was about 50-50 between the S&P and the Emerging Market Index for the first 3-4 years of my career. In the early to mid 2000s, I did switch over to roughly 50-50 S&P and Russell 2k, with the occasional 3% buffer (allocating to about 20% and bringing down the allocation in the Russell 2k). I certainly got hit during the 2008 great recession but I got out of the S&P in October and put it all in the 3% from Oct. '08 to about Feb/March '09. Since then I've been riding the S&P at 80-90% and a 10-20% in the Russell 2k. I have really benefitted from this long bull market for sure. Fellow colleagues (economists) seem not to have

I'm an active investor with pretty significant investment portfolios that we have outside the pension so I am constantly evaluating the allocation/investment elections every couple of months. I've been 100% in the S&P since mid 2020. This past August, I almost pulled back to allocate some into the 3%, but based on what i was reading (WSJ, Bloomberg, etc.) I chose to ride the small pullback to take advantage of the current market. I'm lucky/fortunate that I'm now in a position that I could conceivably leave in the next couple of years (w/o even drawing on the pension until I hit 62, so I could let it continue to grow without additional contributions). I will likely reevaluate the allocation towards the end of this year and I do draw on a number of [domestic] economic prospects/outlook reports produced by the larger banks and investment houses to help guide my thinking.

[Anonymous]

Anonymous wrote:Another WBG staff member. Real 3 all the way. 50 years old.

OP here: you put 100% in real 3%, not 100% of your "bond" allocation ? I used to be 100% real 3%, but i felt like i was a bit too young at 38 to not go for more risk. Maybe thats foolish..

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP here - old thread, but relevant now as much as it was then (in case you just want to know the bottom line, they said the world bank real + 3 is just hard to beat, so go for it)

https://www.bogleheads.org/forum/viewtopic.php?t=156274

Thanks PP for finding this thread for me ! This is perfect. And yes to others who asked: it is the World Bank CPI+real 3% option, no fee, and it is probably subsidized/guaranteed by something else. i dont have much doubts that it is extremely safe.

I thik i am going to put 100% of my bond allocation into it. My only doubt now is whether 90% stocks/ 10% Real 3% makes sense.. Maybe the real 3% is so good I should do 80/20 or 70/30 instead? WWYD?

keep your allocation to 10%. split the remaining 90% between the S&P and Russel 2k - you want to take full advantage of the last 2 months of the year where the market traditionally rises. Keep an eye on the Fed decision regarding rates too. You can always [self] correct the allocation every month, you just need to pay attention to what's going on and the calendar (you have the adjust the allocation before the final day of the month in order for the changes to be reflected the very next month). So you've missed the opportunity to adjust for November but you can still adjust for December.

Thanks ! I did change it right before nov 1st to 10% to the real 3%. From all of what you are saying i am assuming you also work at the Bank? May i ask your age and allocation ? And how long you have been invested the way you are?

PP here (and also offered the clarifying post about the pension) - yes, I'm a fellow colleague and have been with the Bank for more than 22 years. I'm in the new plan and when I started, we could only contribute 5% of our salary instead of the current 11%. I was fortunate to have been able to make the additional contributions over 5 years during the "catch up period" that was part of the most recent pension reform. I just turned 50 last month and hold a pretty senior position in the Bank.

I would have to go back and check for the exact information on my history of allocations, but roughly, I was about 50-50 between the S&P and the Emerging Market Index for the first 3-4 years of my career. In the early to mid 2000s, I did switch over to roughly 50-50 S&P and Russell 2k, with the occasional 3% buffer (allocating to about 20% and bringing down the allocation in the Russell 2k). I certainly got hit during the 2008 great recession but I got out of the S&P in October and put it all in the 3% from Oct. '08 to about Feb/March '09. Since then I've been riding the S&P at 80-90% and a 10-20% in the Russell 2k. I have really benefitted from this long bull market for sure. Fellow colleagues (economists) seem not to have

I'm an active investor with pretty significant investment portfolios that we have outside the pension so I am constantly evaluating the allocation/investment elections every couple of months. I've been 100% in the S&P since mid 2020. This past August, I almost pulled back to allocate some into the 3%, but based on what i was reading (WSJ, Bloomberg, etc.) I chose to ride the small pullback to take advantage of the current market. I'm lucky/fortunate that I'm now in a position that I could conceivably leave in the next couple of years (w/o even drawing on the pension until I hit 62, so I could let it continue to grow without additional contributions). I will likely reevaluate the allocation towards the end of this year and I do draw on a number of [domestic] economic prospects/outlook reports produced by the larger banks and investment houses to help guide my thinking.

OP here: thanks a million for taking the time to explain this !! Super helpful (and ignore post above i didnt see your reply in time)

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP here - old thread, but relevant now as much as it was then (in case you just want to know the bottom line, they said the world bank real + 3 is just hard to beat, so go for it)

https://www.bogleheads.org/forum/viewtopic.php?t=156274

Thanks PP for finding this thread for me ! This is perfect. And yes to others who asked: it is the World Bank CPI+real 3% option, no fee, and it is probably subsidized/guaranteed by something else. i dont have much doubts that it is extremely safe.

I thik i am going to put 100% of my bond allocation into it. My only doubt now is whether 90% stocks/ 10% Real 3% makes sense.. Maybe the real 3% is so good I should do 80/20 or 70/30 instead? WWYD?

keep your allocation to 10%. split the remaining 90% between the S&P and Russel 2k - you want to take full advantage of the last 2 months of the year where the market traditionally rises. Keep an eye on the Fed decision regarding rates too. You can always [self] correct the allocation every month, you just need to pay attention to what's going on and the calendar (you have the adjust the allocation before the final day of the month in order for the changes to be reflected the very next month). So you've missed the opportunity to adjust for November but you can still adjust for December.

Thanks ! I did change it right before nov 1st to 10% to the real 3%. From all of what you are saying i am assuming you also work at the Bank? May i ask your age and allocation ? And how long you have been invested the way you are?

PP here (and also offered the clarifying post about the pension) - yes, I'm a fellow colleague and have been with the Bank for more than 22 years. I'm in the new plan and when I started, we could only contribute 5% of our salary instead of the current 11%. I was fortunate to have been able to make the additional contributions over 5 years during the "catch up period" that was part of the most recent pension reform. I just turned 50 last month and hold a pretty senior position in the Bank.

I would have to go back and check for the exact information on my history of allocations, but roughly, I was about 50-50 between the S&P and the Emerging Market Index for the first 3-4 years of my career. In the early to mid 2000s, I did switch over to roughly 50-50 S&P and Russell 2k, with the occasional 3% buffer (allocating to about 20% and bringing down the allocation in the Russell 2k). I certainly got hit during the 2008 great recession but I got out of the S&P in October and put it all in the 3% from Oct. '08 to about Feb/March '09. Since then I've been riding the S&P at 80-90% and a 10-20% in the Russell 2k. I have really benefitted from this long bull market for sure. Fellow colleagues (economists) seem not to have

I'm an active investor with pretty significant investment portfolios that we have outside the pension so I am constantly evaluating the allocation/investment elections every couple of months. I've been 100% in the S&P since mid 2020. This past August, I almost pulled back to allocate some into the 3%, but based on what i was reading (WSJ, Bloomberg, etc.) I chose to ride the small pullback to take advantage of the current market. I'm lucky/fortunate that I'm now in a position that I could conceivably leave in the next couple of years (w/o even drawing on the pension until I hit 62, so I could let it continue to grow without additional contributions). I will likely reevaluate the allocation towards the end of this year and I do draw on a number of [domestic] economic prospects/outlook reports produced by the larger banks and investment houses to help guide my thinking.

Thanks again for your insights. will follow your lead and reassess in December before the new year i may come back to ping you for advice!

[Anonymous]

Best allocation when back testing is the 40/140 allocation.

Meaning 100 percent equities till 40 then move 1 percent each year to low risk shorter term bond funds.

You capture a lot of upside and in retirement you spend the short term bonds on down years to weather storm.

Remember a lot of folks including me don’t touch 401k till RMDs start which is like 73. 80/20 has become the new 60/40 for a 60 year old.

Target date funds have been way underperforming do to dead weight of bonds. Given they from 55-65 start a heavy downward glide to bonds a lot of advisors now recommend your target date funds be set to 75

I would take the guaranteed for the bonds. When rates rise it will rise.

My older brother who is turning 62 was 100 percent stocks till
2018. Even then he only took some risk off table by paying off his only mortgage on his vacation/retirement home. Then in 2019 went 95/5.

We are talking before and after tax.

Now at 62 he is thinking of going 90/10 and glide to 80/20 over next ten years to 72.

He retired January 2022 after he does max into 401k in 401k which he started in 1983.

Bonds have not held their own lately in 2000 crash and 2008 crash bonds were great but now they pay so little no protection really unless cash or short term treasuries that yield near nothing

[Anonymous]

Anonymous wrote:

Anonymous wrote:Another WBG staff member. Real 3 all the way. 50 years old.

OP here: you put 100% in real 3%, not 100% of your "bond" allocation ? I used to be 100% real 3%, but i felt like i was a bit too young at 38 to not go for more risk. Maybe thats foolish..

Pp here. I put 100 percent on real 3, if I used to be private sector and built up 401(k)s and savings outside of the WBG (and my dh’s retirement/savings), so in the one only about 20 percent of our funds dedicated to retirement are in the wbg real 3. So in essence we put all of our more conservative investments in real three through the plan and then we invest outside resources and savings in higher risk and reward investments. Bill three is just the best conservative investment we’ve found so we use it to fill that niche.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP here - old thread, but relevant now as much as it was then (in case you just want to know the bottom line, they said the world bank real + 3 is just hard to beat, so go for it)

https://www.bogleheads.org/forum/viewtopic.php?t=156274

Thanks PP for finding this thread for me ! This is perfect. And yes to others who asked: it is the World Bank CPI+real 3% option, no fee, and it is probably subsidized/guaranteed by something else. i dont have much doubts that it is extremely safe.

I thik i am going to put 100% of my bond allocation into it. My only doubt now is whether 90% stocks/ 10% Real 3% makes sense.. Maybe the real 3% is so good I should do 80/20 or 70/30 instead? WWYD?

keep your allocation to 10%. split the remaining 90% between the S&P and Russel 2k - you want to take full advantage of the last 2 months of the year where the market traditionally rises. Keep an eye on the Fed decision regarding rates too. You can always [self] correct the allocation every month, you just need to pay attention to what's going on and the calendar (you have the adjust the allocation before the final day of the month in order for the changes to be reflected the very next month). So you've missed the opportunity to adjust for November but you can still adjust for December.

Thanks ! I did change it right before nov 1st to 10% to the real 3%. From all of what you are saying i am assuming you also work at the Bank? May i ask your age and allocation ? And how long you have been invested the way you are?

PP here (and also offered the clarifying post about the pension) - yes, I'm a fellow colleague and have been with the Bank for more than 22 years. I'm in the new plan and when I started, we could only contribute 5% of our salary instead of the current 11%. I was fortunate to have been able to make the additional contributions over 5 years during the "catch up period" that was part of the most recent pension reform. I just turned 50 last month and hold a pretty senior position in the Bank.

I would have to go back and check for the exact information on my history of allocations, but roughly, I was about 50-50 between the S&P and the Emerging Market Index for the first 3-4 years of my career. In the early to mid 2000s, I did switch over to roughly 50-50 S&P and Russell 2k, with the occasional 3% buffer (allocating to about 20% and bringing down the allocation in the Russell 2k). I certainly got hit during the 2008 great recession but I got out of the S&P in October and put it all in the 3% from Oct. '08 to about Feb/March '09. Since then I've been riding the S&P at 80-90% and a 10-20% in the Russell 2k. I have really benefitted from this long bull market for sure. Fellow colleagues (economists) seem not to have

I'm an active investor with pretty significant investment portfolios that we have outside the pension so I am constantly evaluating the allocation/investment elections every couple of months. I've been 100% in the S&P since mid 2020. This past August, I almost pulled back to allocate some into the 3%, but based on what i was reading (WSJ, Bloomberg, etc.) I chose to ride the small pullback to take advantage of the current market. I'm lucky/fortunate that I'm now in a position that I could conceivably leave in the next couple of years (w/o even drawing on the pension until I hit 62, so I could let it continue to grow without additional contributions). I will likely reevaluate the allocation towards the end of this year and I do draw on a number of [domestic] economic prospects/outlook reports produced by the larger banks and investment houses to help guide my thinking.

Indeed, so very helpful! Another WB colleague here and I've learned so much. I am 44 and only now starting to really think through how to prepare for retirement. One thing I am not clear is whether I need to invest more outside of the Bank pension. Is there somewhere where I can find information about what amount my pension should reach by what age? thanks so much!

[Anonymous]

Is it an annuity? TIAA CREF offers this (guaranteed 3% return), but you have to take the money out over a ten year period.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP here - old thread, but relevant now as much as it was then (in case you just want to know the bottom line, they said the world bank real + 3 is just hard to beat, so go for it)

https://www.bogleheads.org/forum/viewtopic.php?t=156274

Thanks PP for finding this thread for me ! This is perfect. And yes to others who asked: it is the World Bank CPI+real 3% option, no fee, and it is probably subsidized/guaranteed by something else. i dont have much doubts that it is extremely safe.

I thik i am going to put 100% of my bond allocation into it. My only doubt now is whether 90% stocks/ 10% Real 3% makes sense.. Maybe the real 3% is so good I should do 80/20 or 70/30 instead? WWYD?

keep your allocation to 10%. split the remaining 90% between the S&P and Russel 2k - you want to take full advantage of the last 2 months of the year where the market traditionally rises. Keep an eye on the Fed decision regarding rates too. You can always [self] correct the allocation every month, you just need to pay attention to what's going on and the calendar (you have the adjust the allocation before the final day of the month in order for the changes to be reflected the very next month). So you've missed the opportunity to adjust for November but you can still adjust for December.

Thanks ! I did change it right before nov 1st to 10% to the real 3%. From all of what you are saying i am assuming you also work at the Bank? May i ask your age and allocation ? And how long you have been invested the way you are?

PP here (and also offered the clarifying post about the pension) - yes, I'm a fellow colleague and have been with the Bank for more than 22 years. I'm in the new plan and when I started, we could only contribute 5% of our salary instead of the current 11%. I was fortunate to have been able to make the additional contributions over 5 years during the "catch up period" that was part of the most recent pension reform. I just turned 50 last month and hold a pretty senior position in the Bank.

I would have to go back and check for the exact information on my history of allocations, but roughly, I was about 50-50 between the S&P and the Emerging Market Index for the first 3-4 years of my career. In the early to mid 2000s, I did switch over to roughly 50-50 S&P and Russell 2k, with the occasional 3% buffer (allocating to about 20% and bringing down the allocation in the Russell 2k). I certainly got hit during the 2008 great recession but I got out of the S&P in October and put it all in the 3% from Oct. '08 to about Feb/March '09. Since then I've been riding the S&P at 80-90% and a 10-20% in the Russell 2k. I have really benefitted from this long bull market for sure. Fellow colleagues (economists) seem not to have

I'm an active investor with pretty significant investment portfolios that we have outside the pension so I am constantly evaluating the allocation/investment elections every couple of months. I've been 100% in the S&P since mid 2020. This past August, I almost pulled back to allocate some into the 3%, but based on what i was reading (WSJ, Bloomberg, etc.) I chose to ride the small pullback to take advantage of the current market. I'm lucky/fortunate that I'm now in a position that I could conceivably leave in the next couple of years (w/o even drawing on the pension until I hit 62, so I could let it continue to grow without additional contributions). I will likely reevaluate the allocation towards the end of this year and I do draw on a number of [domestic] economic prospects/outlook reports produced by the larger banks and investment houses to help guide my thinking.

Indeed, so very helpful! Another WB colleague here and I've learned so much. I am 44 and only now starting to really think through how to prepare for retirement. One thing I am not clear is whether I need to invest more outside of the Bank pension. Is there somewhere where I can find information about what amount my pension should reach by what age? thanks so much!

I'm the PP to whom you responded. To you and the OP, I would highly recommend the pre-retirement seminar (it's virtual since the start of the HBW). Lots of very useful information regarding retirement planning (e.g., estate planning, wills, etc.) that we should all have in place, especially considering how much we travel on mission and the types of places we work (FCV environments). It's incredibly helpful for US citizens as we have different tax considerations as compared to colleagues who are on a G4 visa - but even for foreign nationals I understand there are important things you need to consider. Do not overlook the retiree health insurance part - very underrated and yet incredibly important component of our benefits package.

The myHR website has pension tools (the pension calculator) where you can run different scenarios to project the pension cash and defined benefits - you input the assumptions and variables and the calculator then computes it all using the complex formulas that underpin the pension components.