Investing Your Walmart DCMP

Once you have elected how much to contribute to your Walmart Deferred Compensation Matching Plan (DCMP) and when you wish to receive the payouts, the remaining important decision is how you want to invest those funds.

In this article, we'll review a framework to guide your Walmart DCMP investment allocation and explore two illustrative examples.

What are Your Walmart DCMP Investment Options?

Participants can select from a list of investment funds similar to those available in the 401(k) Plan. Below is a high-level overview of the various types of funds:

• Higher Expected Return Funds: These funds offer exposure to asset classes with higher expected returns (and higher volatility) such as U.S. Equity and International Equity.
• Lower Volatility Funds: These funds offer exposure to less volatile (albeit lower expected return) asset classes such as Bonds, Real Estate and Cash.
• Target Date Funds: You also have access to Target Date Funds that adjust your allocation from higher return to lower volatility funds as you approach a retirement date.
• Flexible Adjustments: Unlike contribution and payout timing decisions, DCMP participants can adjust their investment allocations throughout the year, not just during the election window.

From this list of various investment funds, how do you determine the right investments for you? Here’s a framework to help you begin making that decision.

Framework for Choosing DCMP Investments

When deciding between investing in higher expected return, more volatile funds versus lower expected return, less volatile options, consider these two factors:

1. Time Horizon: Although DCMP payouts typically occur before withdrawals from other investment accounts, you might still be several years away from receiving payouts. A longer time horizon generally allows for investment in higher-return assets, as you can ride out short-term market fluctuations.
2. Need: If you require the DCMP to provide a specific amount, consider allocating more towards lower-volatility funds, such as short-term bonds or cash, especially if higher returns are not necessary to meet your payout goals.

Now, let's take a look at a couple of examples!

Example 1: VP Planning to Retire in 3 Years (Short Time Horizon and High Need)

This VP needs the DCMP to provide at least $150,000 annually for the first five years of retirement, requiring approximately $700,000 in the DCMP at retirement with a 4% growth rate. He currently has $400,000 in the DCMP and plans to contribute $100,000 each year for the next three years while still working at Walmart.

In this case, it’s advisable to invest conservatively in short-term bonds or cash. If he decides to contribute more than $100,000 annually (or lower the annual target below $150,000), he can consider a small allocation to higher-return investments.

Example 2: Sr. Director Planning to Retire in 10+ Years (Long Time Horizon and Low Need)

This Sr. Director has a longer time horizon and isn’t reliant on receiving a fixed amount from the DCMP at this stage. She is primarily focused on tax benefits and matching contributions, rather than on annual payments after leaving Walmart.

With this extended timeframe, she can invest in higher-return funds, as short-term volatility is less critical to her goals. However, as she approaches retirement, her priorities may shift closer to those in Example 1.

At Taurus Financial Planning, we offer guidance on all aspects of the Walmart DCMP tailored to your unique situation and goals. If you have a question on how the Walmart DCMP could benefit you or want to explore if working with a financial planner makes sense for you, feel free to schedule time on my calendar. I'm happy to help!

Wrap-Up

Over the past few weeks, we've explored the three critical decisions for creating an effective Walmart DCMP strategy. Next, we’ll examine case studies to see how the DCMP can address common issues faced by many Walmart and Sam's Club Leaders. Below are links to articles discussing Walmart DCMP Contributions, Distributions and More.

Taurus Financial Planning is a Fee-Only Wealth Management firm based in Bentonville, AR. The firm offers comprehensive financial planning, tax planning and investment management to corporate executives across the country.

Taurus Financial Planning is a Registered Investment Advisor with the State of Arkansas. This information is provided as a guide to assist you in your financial planning. The specific examples are provided for illustration purposes only and are not representative of specific investments or guarantees of future returns. Please consult with a professional for specific questions regarding your particular situation. If there is any error or inconsistency between this document and the official company plan documents, your company plan documents will govern.

This publication is for informational purposes only and is not intended as tax, accounting or legal advice or as an offer or solicitation of an offer to buy or sell or as an endorsement of any company security fund or other securities or non securities offering. This publication should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made by the Author, in the future, will be profitable or equal the performance noted in this publication.