Integrating retirement fund into PP

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Hal
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Integrating retirement fund into PP

Post by Hal » Wed Mar 22, 2017 10:48 pm

Hello All,

Yet another fitting a retirement fund into the PP question !

If you have a dormant retirement fund that you cannot access, or contribute to, until ceasing work (5 years away approx) and it constitutes about 25% of your assets, is there any way to make a PP with this?

The fund consists of two choices as listed below. One is a managed fund with very wide allocation bands, the other cash only.

Given that it is wise to have an "accessible emergency fund" as per the cash in the PP, I cannot see a way to build a PP around this. Any thoughts?
Even if I did keep this in the Variable Portfolio, if I chose the Cash only option, would it be worth hedging the inflation risk with some Gold?

Looking forward to your thoughts,
Hal

<snip>
Investment Default Fund
Cash 0–65%
Fixed interest 0–65%
Equities 15–75%
Property 5–25%
Infrastructure 0–20%
Commodities 0–15%
Other 0–30%
Foreign currency hedge ratio 0–100%
<snip>

or
<snip>
Cash Investment Option
Objective
To preserve its capital and earn a pre-tax return
close to that of the Bloomberg AusBond bank bill
index by investing 100% in cash assets.
<snip>
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eufo
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Re: Integrating retirement fund into PP

Post by eufo » Thu Mar 23, 2017 8:44 pm

Can you split it up? Say 75% in the default fund and 25% cash? That might be your closest bet. Auto rebalance, if possible.

Once you have access to the funds without penalty, withdraw and put them to use where you really want.
Don't agree with me too strongly or I'm going to change my mind
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Hal
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Re: Integrating retirement fund into PP

Post by Hal » Thu Mar 23, 2017 9:23 pm

Thanks for the reply eufo,

Unfortunately, its either all cash or all the default fund. Nice idea but.....
And just to rub salt in the wound, you can only change your selection twice in a year!

I am leaning towards this total allocation

25% Cash option: All in the retirement fund

25% Gold/Silver

25% Shares

25% "Emergency Cash" to cover few months expenses plus top up with Longest Term bonds I can purchase. Overall this 25% will probably be equivalent to ST treasuries in duration.

As I live in Australia, I really don't want to hold more than 50% AUD denominated assets in case the currency take a dive.
The PP sounds a good idea if you live in the USA but I am having serious doubts about how it will deliver elsewhere.

If the AUD went the same way as the Zimbabwe dollar, I doubt that the gold price (in USD) would even move.

Regards,
Hal
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eufo
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Re: Integrating retirement fund into PP

Post by eufo » Thu Mar 23, 2017 9:52 pm

Hal wrote:Unfortunately, its either all cash or all the default fund.
Yipes! That's just horrible.

Given the all-in nature, I think going all cash assets in that account is your best bet, since the default fund is a real wild card. The remainder of your assets outside the account could go to everything else as Desert has stated. Keeping extra cash is probably a good idea since you can't touch these funds for 5 years.
Hal wrote:As I live in Australia, I really don't want to hold more than 50% AUD denominated assets in case the currency take a dive.
The PP sounds a good idea if you live in the USA but I am having serious doubts about how it will deliver elsewhere.

If the AUD went the same way as the Zimbabwe dollar, I doubt that the gold price (in USD) would even move.
If you are concerned about the AUD, maybe you could keep some of your extra cash in USD. When I lived in the Philippines most banks allowed you to have both a PHP and a USD account. Can you do this in Australia?
Don't agree with me too strongly or I'm going to change my mind
Libertarian666
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Re: Integrating retirement fund into PP

Post by Libertarian666 » Thu Mar 23, 2017 11:59 pm

In your case I would just put the retirement fund into the default option and set up my other assets as a 4x25 PP independent of that account. That isn't ideal, but I think it's the best you can do.
stuper1
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Re: Integrating retirement fund into PP

Post by stuper1 » Fri Mar 24, 2017 12:13 am

What are the expense ratios on those two options?

What has the performance of the default fund been over the years?
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Hal
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Re: Integrating retirement fund into PP

Post by Hal » Fri Mar 24, 2017 1:43 am

Thanks eufo, desert and Libertarian666, (edit: and stuper1 ! )

After some digging around I found the following results annualised over the past 10 years:

Cash 3.6%
Default Fund 5.24%

and the expense ratios are buried so deeply, I cannot find them yet.

Bear in mind Australia is coming out of a mining and housing boom (house prices are beyond belief! ), so I doubt these returns will keep going.

Anyways, I do plan to make a PP, and I really like the idea of keeping some cash in another currency in the VP.

As much as I would like to leave the retirement fund in cash, set it aside, and create a normal PP as well.... having around 3/4 of my funds in AUD assets is a bit unsettling. So even though I don't want to, I feel like I shall have to integrate the Retirement Fund (as AUD cash) into the PP

There is always a plan B for retirement.....

This was found near where I live. Maybe its worth picking one up as well?
https://en.wikipedia.org/wiki/Welcome_Stranger

Hal
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sophie
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Re: Integrating retirement fund into PP

Post by sophie » Fri Mar 24, 2017 7:38 am

Given that info....

My vote is to put the money in the cash fund and don't try to integrate this into the PP. The moment you can get it out of there, do so and then split the money evenly between the four PP assets.

We all have this employer retirement fund issue. It just gets too complicated trying to make it work with the PP. I gave up a few years ago with my employer retirement accounts, and have the same plan to get the money out and into a PP-friendly account at the first opportunity.
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