Building a strong portfolio of accounts requires that its constituent parts be integrated into a cohesive whole. For example, if you have a spouse or partner with accounts, you may wish to integrate these into a single household portfolio for purposes of investment management.
With the above in mind, the upcoming changes to the UNC System retirement plans offer you opportunities to refine your investments. This is particularly true with the fixed-income portion of your portfolio. Ideally, your fixed-income assets should be invested in a mix of options that have a range of levels of return and commiserate withdrawal restrictions. This approach is a reasonable way to address interest rate risk in your portfolio.
Prior to July 1, 2014, Lincoln Financial Group (LFG) and VALIC have offered the most competitive combination of credited interest rates and withdrawal restrictions of the four providers. Beginning July 1, new participants in the UNC System Retirement plans will no longer be able to open accounts with VALIC or LFG.
There is considerable interest rate risk that should be evaluated when allocating fixed-income assets. Although there has been a rally in treasuries during the first part of 2014, for the intermediate-term, bond funds may decrease in value coincident with an expected rise in interest rates. For this reason, you may want to seek out stable value options.
Even though some of the same investments will be offered in both the ORP and the 403(b), going forward the return and withdrawal restrictions of each are quite dissimilar. For example, within the ORP, TIAA Traditional carries with it a nine-year withdrawal period. TIAA Traditional within the 403(b) currently credits 3% interest per year but has no withdrawal restrictions. In this instance, the strength of the 403(b) should be considered as part of your portfolio along with a laddered set of individual bonds that could be placed in brokerage IRA or post-tax accounts.
Contact our office with questions.