Understanding Your TSP Options

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Understanding Your TSP Options

Postby gkaplan » Fri Apr 05, 2013 8:36 am

Tammy Flanagan this week devotes her column to discussing one's TSP investment options.

http://www.govexec.com/pay-benefits/retirement-planning/2013/04/understanding-your-tsp-options/62301/?oref=retirement_planning_nl
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Re: Understanding Your TSP Options

Postby red5 » Fri Apr 05, 2013 10:28 am

Thank you for the link. I currently have my entire FI position in the G Fund. I found the comment that many view it as "savings account" rather than a "retirement account" interesting.

For curiosity sake I attempted to do a quick comparison between the G Fund returns and CD returns. It "seemed" that the G Fund has been a bit better than 5-year CD Rates, at least for the last 10 years or so. I was eye balling some graphs so I could be wrong.

I also quickly compared the G Fund average returns (1/3/5/10) against Vanguards Intermediate and Short term treasury funds. It seems to fit somewhere in the middle of those two funds.

This very quick and rudimentary analysis surely will not benefit anyone, I was merely curious as to what people were getting compared to other "savings" options.
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Re: Understanding Your TSP Options

Postby Blues » Fri Apr 05, 2013 10:36 am

The "G" fund is a particularly useful vehicle for those employees who have grown their portfolios over the years via investments in riskier assets and now, nearing or in retirement, want to hold on to what they've amassed.

Combining characteristics of a "stable value" fund with a rate based upon the weighted average of government securities with a term of 5 years or longer, it's a pretty nice option to have at one's disposal.

While I once used some of the other funds in furtherance of my investment goals...it's all about the "G" Fund for my assets within the TSP at this juncture. I can get my equity and additional fixed income options at Vanguard. 8-)
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Re: Understanding Your TSP Options

Postby VictoriaF » Fri Apr 05, 2013 10:49 am

For me, the G fund acts as Golden handcuffs. Upon retirement, I would like to move my assets from the TSP to a Vanguard IRA and then do Roth conversions. But the G fund is difficult to give up.

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Re: Understanding Your TSP Options

Postby Blues » Fri Apr 05, 2013 11:01 am

VictoriaF wrote:For me, the G fund acts as Golden handcuffs. Upon retirement, I would like to move my assets from the TSP to a Vanguard IRA and then do Roth conversions. But the G fund is difficult to give up.

Victoria


That's a good plan, Victoria, and I can definitely understand some of your reluctance.

Years ago I actually moved my traditional IRA accounts into the TSP due to the favorable tax treatment I would receive from my state on future withdrawals. Since I'll only have to pay federal tax (and most likely at the same marginal tax rate as I would today) there's no sense in my converting those funds...

...but that benefit allows us to take advantage of partially converting my wife's tIRA yearly so that it'll be fully converted by the time I need to take an RMD from the TSP, and do so without paying additional state tax. Win-Win. 8-)
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Re: Understanding Your TSP Options

Postby Professor Emeritus » Fri Apr 05, 2013 11:18 am

We go the other way. DWs entire TSP is in the C fund and we use our IRAs at Vanguard for asset allocation.
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Re: Understanding Your TSP Options

Postby VictoriaF » Fri Apr 05, 2013 11:22 am

Professor Emeritus wrote:We go the other way. DWs entire TSP is in the C fund and we use our IRAs at Vanguard for asset allocation.

What does your wife use for her fixed income at Vanguard?

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Re: Understanding Your TSP Options

Postby tadamsmar » Fri Apr 05, 2013 11:35 am

She leaves out one reason the G Fund is large:

Some investors understand their financial options and put a large percentage or all of the overall family bond allocation in the G Fund. These investors or their spouse have IRAs, 401Ks, and other investments create a overall allocation similar to an age appropriate L Fund, which is closer to optimal than any allocation that does not have the TSP in 100% G.
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