What to do with 401K portfolio moving from TSP Gov

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sydney52
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What to do with 401K portfolio moving from TSP Gov

Post by sydney52 » Sat Aug 30, 2014 9:08 pm

I work for the Federal Gov't and will retire in 2 months. I want to move my TSP, 401K, to another 401K investment(s) at Vanguard possibly, but having difficulty in deciding where exactly to invest it within Vanguard. I believe I should be moderately conservative because I will need this money to live on for the next 30 years as well as SS and my Federal annuity. I will be 62 at retirement this winter 2014 and expect to start SS and my Federal retirement in Jan, 2015. Will need in addition to SS and Fed. retirement approx. $ 600 per month out of my 401K to meet living expenses. 401K is approx. $ 250K. Any advice please in what Index funds to invest in. Again I feel I have to be moderately conservative, since I can't afford to lose any of my 401K.

trueblueky
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Re: What to do with 401K portfolio moving from TSP Gov

Post by trueblueky » Sat Aug 30, 2014 10:12 pm

TSP has index funds at very low cost. What do you need that's not there?

G Fund has no risk. It's a great place for your bond position.

If you close TSP, you can't go back. If you leave some money there, you can roll other tax-deferred plans into it.

Play with the annuity calculator at tsp.gov. you can get more than $600/month from a TSP annuity.

If you ask for TSP to send you $600/month, they estimate your money will last 59 years, assuming 2% growth rate. The G Fund returned 2.31% over the 12 months ending 31 July, so 2% is very conservative.

If you're a conservative investor, you could move your TSP to the L Income Fund, which is 74% G Fund, 6% F Fund, and the remaining 20% in equities (divided among C, S, and I Funds). That would be 20/80 with 25% of stock position in international. I'm not that conservative with my TSP, but it's a personal choice based on risk tolerance.

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hoppy08520
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Re: What to do with 401K portfolio moving from TSP Gov

Post by hoppy08520 » Sat Aug 30, 2014 10:13 pm

Why do you want to leave the tsp? Do you have other investments? At a 4% safe withdrawal rate, that's $10K per year, so you should be ok. I just wouldn't be so quick to leave the tsp.

trueblueky
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Re: What to do with 401K portfolio moving from TSP Gov

Post by trueblueky » Sat Aug 30, 2014 10:22 pm

You mention both TSP and 401k. If you have a 401k from a non-federal employer, you can transfer that money to TSP with TSP Form 60.

Roth must go to Roth, and traditional to traditional.

Ybsybs
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Re: What to do with 401K portfolio moving from TSP Gov

Post by Ybsybs » Sat Aug 30, 2014 10:25 pm

I've rolled a civilian 401k portfolio into my old TSP account. Have you looked at what TSP offers? My civilian 401k had high fees paid by the company while I was employed there and by me if I left my assets with them, so of course I moved that money. But TSP fees are very low and stay super low even after you leave.

Vanguard's admiral class shares for the total stock market (VTSAX) has an expense ratio of 0.05%. Pretty good right? But look at TSP's costs.

TSP's C Fund (the S&P 500 equivalent) has an expense ratio of 0.029%. And the S Fund (which is the rest of the US stock market beyond the S&P 500) has a 0.026% expense ratio. If you want international exposure, get the I Fund. The G Fund and F Fund are bonds. They all have very, very low expense ratios.

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The529guy
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Re: What to do with 401K portfolio moving from TSP Gov

Post by The529guy » Sat Aug 30, 2014 10:35 pm

Welcome to the forum!
sydney52 wrote:I work for the Federal Gov't and will retire in 2 months. I want to move my TSP, 401K, to another 401K investment(s) at Vanguard possibly, but having difficulty in deciding where exactly to invest it within Vanguard.
The TSP has huge fans on this forum, and many folks here wish they had access. I wish I had never left the TSP (before discovering bogleheads.org). If you tell us more about your desire to leave the TSP, I think that will help you get more advice here.

sydney52
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Re: What to do with 401K portfolio moving from TSP Gov

Post by sydney52 » Sat Aug 30, 2014 11:12 pm

I've thought of leaving TSP b/c if I have any kind of emergencies I would not be able to get any extra money out of TSP in a hurry. IE need extra $1k for vet bills or need $ 500 extra for hot water heater, etc. Not sure exactly how much I will need monthly out of TSP for sure and cannot adjust it except once per year. Again, best estimate with my expenses is I will need about $ 600 /month out of TSP to live, could be a little more could be less. With TSP rolled over into ie Vanguard, I would be able to instantly have access to extra money out of my 401K for emergency use or adjust how much I am taking out, up or down. I could not do that with TSP. I live very frugally, but still have house pymt of 800 plus change per month for 14 yrs and car pymt of 280 for another 3 yrs. Just have fears that if I need extra money I will not be able to get to it if it's in TSP. I'm retiring at 62 for bone and joint health reasons with such a physically demanding job, just unable to do it anymore. I'm in the L2020 for last few months after taking more risk and being in L2040 for last several years. I appreciate all continuing comments. Thank you.

sydney52
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Re: What to do with 401K portfolio moving from TSP Gov

Post by sydney52 » Sat Aug 30, 2014 11:15 pm

trueblueky wrote:You mention both TSP and 401k. If you have a 401k from a non-federal employer, you can transfer that money to TSP with TSP Form 60.

Roth must go to Roth, and traditional to traditional.
Sorry for confusion, I do not have another 401K, only the TSP.

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grabiner
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Re: What to do with 401K portfolio moving from TSP Gov

Post by grabiner » Sat Aug 30, 2014 11:21 pm

The reason to leave money in the TSP is the G fund, which is better than anything available at retail; Vanguard has comparable funds to the F, C, S and I funds at barely higher costs.

Therefore, if you have more in the TSP than you will want to have in the G fund, you can make your one partial withdrawal from the TSP to roll part of it into a Vanguard IRA, leaving the rest of the TSP in the G fund until you are ready to annuitize it or spend it gradually, and using the Vanguard IRA for unscheduled expenses.
Wiki David Grabiner

sydney52
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Re: What to do with 401K portfolio moving from TSP Gov

Post by sydney52 » Sat Aug 30, 2014 11:21 pm

trueblueky wrote:TSP has index funds at very low cost. What do you need that's not there?

G Fund has no risk. It's a great place for your bond position.

If you close TSP, you can't go back. If you leave some money there, you can roll other tax-deferred plans into it.

Play with the annuity calculator at tsp.gov. you can get more than $600/month from a TSP annuity.

If you ask for TSP to send you $600/month, they estimate your money will last 59 years, assuming 2% growth rate. The G Fund returned 2.31% over the 12 months ending 31 July, so 2% is very conservative.

If you're a conservative investor, you could move your TSP to the L Income Fund, which is 74% G Fund, 6% F Fund, and the remaining 20% in equities (divided among C, S, and I Funds). That would be 20/80 with 25% of stock position in international. I'm not that conservative with my TSP, but it's a personal choice based on risk tolerance.
I realize the cost basis is low in TSP and I think I need to make at least 7-9% growth annually, and according to general advise could take 4% per year out. Still need to be moderately conservative in investments if my TSP is to last my lifetime, ie 50/50 stocks/bond split, the issue is can I get to emergency money in TSP if need arises. I do not believe I can, hence the thoughts of moving to Vanguard fund(s)

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grabiner
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Re: What to do with 401K portfolio moving from TSP Gov

Post by grabiner » Sun Aug 31, 2014 12:11 am

sydney52 wrote:I realize the cost basis is low in TSP and I think I need to make at least 7-9% growth annually, and according to general advise could take 4% per year out.
If you need 7-9% growth annually, you aren't ready to retire. 8% is about what I would expect from an investment which is entirely in stock, and you can't afford to take that type of risk.

However, you can take more than 4% per year if you get an annuity; in return for taking the annuity, you would leave nothing when you die. The TSP offers an inflation-adjusted annuity as one of the withdrawal options; this might be enough for you to live on.
Wiki David Grabiner

trueblueky
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Re: What to do with 401K portfolio moving from TSP Gov

Post by trueblueky » Sun Aug 31, 2014 8:11 am

You can do multiple things with TSP at once. You could transfer say $50,000 to an IRA to give you the flexibility you desire AND have TSP send you $600/month. You're right that you only get one lump sum withdrawal.

Or, you could have TSP transfer a set amount into an IRA each month, and take your monthly withdrawals from the IRA until it reaches the desired size.

Have you looked at delaying SS and taking TSP withdrawals until you're 70? The SS website can do the math for you. I imagine your SS would increase by more than $600/month by waiting to start it, but you need to check the numbers.

retiredjg
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Re: What to do with 401K portfolio moving from TSP Gov

Post by retiredjg » Sun Aug 31, 2014 8:47 am

If you need $600 a month, that is a 2.8% withdrawal rate. That is a low enough withdrawal that you have some wiggle room. I'm not saying you can do wild and stupid stuff with your money, but you might not be cutting it as close as you think.

If you have not yet taken your one time withdrawal from the TSP, you could move a significant portion out to an IRA - say $75k or $100k. This would leave a lot of money in the very low cost TSP and also give you a cushion in an IRA that you could access quickly. Then start your $600 withdrawal per month from the TSP and see how things go. If you don't get comfortable with that arrangement, you could then simply take all the money out of the TSP and close the TSP at that point.

You could invest each account in a conservative fund, say the L 2020 at the TSP and one of the 2 conservative LifeStrategy funds in the IRA.

Or, if you decide to move all your money out now, you could choose one of the LifeStrategy funds or a Target Retirement fund at Vanguard.


Again I feel I have to be moderately conservative, since I can't afford to lose any of my 401K.
I'm concerned about this statement. If a crash occurs, there is no investment other than cash that will not lose value - at least temporarily. But if you invest all in cash, your nest egg won't keep up with inflation.

You have to realize that you will lose some of your TSP at some point. The solution is to expect that to happen and set the portfolio up so that you won't lose more than you can stand. For example, if a crash starts tomorrow and you stay in the L2020 fund, your TSP value could drop about 20 to 25%. This is because the L2020 fund is about 50% stocks and 50% bonds. If you feel you can't tolerate seeing the value drop that much for awhile, you need to move to a lower stock to bond ratio.

Enkidu
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Re: What to do with 401K portfolio moving from TSP Gov

Post by Enkidu » Mon Sep 01, 2014 10:31 am

Sidney-

Some people move all of their retirement savings out of TSP because the withdraw options are not flexible, but there are other options that will solve your problem. I understand the issue about potentially needing fast access to more money than is needed for typical monthly expenses. You don't need to transfer the whole TSP balance to solve this problem. You can roll $50,000 - $75,000 to a Vanguard account for an emergency fund. This would give you flexibility if the need arises. You may want to consider the LifeStrategy Conservative growth fund for this. It is 80% bonds, but still may lose value at times. The ironic thing is the the G fund would be perfect for an emergency fund if you could actually access it in an emergency.

You could also just set your monthly withdraws from TSP far higher than needed until you have a reasonable emergency fund in a taxable account. This approach has some disadvantages, but is probably better than taking all the funds out of TSP in my opinion.

However, if you choose to move all your money, rolling to Vanguard is probably better than many other institutions. You may want to consider the LifeStrategy funds- LifeStrategy Conservative growth is 60% bonds and 40% stocks and may work for you.

Others have suggested purchasing an annuity or delaying Social Security. These are reasonable options to consider and may increase your long-term "safe" income. It is not clear from your post if you are married, but this is also a factor when evaluating these options. Another factor to consider is your expected longevity. There are a lot of decisions that you will be making at retirement that will affect your long-term well-being. You may want to do a new post if you want more advise on claiming SS or annuities. The Bogelhead wicki also has solid information.

trueblueky
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Re: What to do with 401K portfolio moving from TSP Gov

Post by trueblueky » Wed Sep 03, 2014 5:08 pm

Recommend you cash in as much annual leave as possible in order to build your emergency fund. You should not be withdrawing from your retirement fund for a $500 emergency.

dickenjb
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Re: What to do with 401K portfolio moving from TSP Gov

Post by dickenjb » Wed Sep 03, 2014 6:40 pm

sydney52 wrote: I realize the cost basis is low in TSP and I think I need to make at least 7-9% growth annually,<snip>
Good luck with that. That is pretty aggressive target for 50/50 asset allocation. I would plan on more like 6% and you'd better read up on "sequence of returns risk".

sydney52
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Re: What to do with 401K portfolio moving from TSP Gov

Post by sydney52 » Tue Sep 09, 2014 8:48 pm

Enkidu wrote:Sidney-

Some people move all of their retirement savings out of TSP because the withdraw options are not flexible, but there are other options that will solve your problem. I understand the issue about potentially needing fast access to more money than is needed for typical monthly expenses. You don't need to transfer the whole TSP balance to solve this problem. You can roll $50,000 - $75,000 to a Vanguard account for an emergency fund. This would give you flexibility if the need arises. You may want to consider the LifeStrategy Conservative growth fund for this. It is 80% bonds, but still may lose value at times. The ironic thing is the the G fund would be perfect for an emergency fund if you could actually access it in an emergency.

You could also just set your monthly withdraws from TSP far higher than needed until you have a reasonable emergency fund in a taxable account. This approach has some disadvantages, but is probably better than taking all the funds out of TSP in my opinion.

However, if you choose to move all your money, rolling to Vanguard is probably better than many other institutions. You may want to consider the LifeStrategy funds- LifeStrategy Conservative growth is 60% bonds and 40% stocks and may work for you.

Others have suggested purchasing an annuity or delaying Social Security. These are reasonable options to consider and may increase your long-term "safe" income. It is not clear from your post if you are married, but this is also a factor when evaluating these options. Another factor to consider is your expected longevity. There are a lot of decisions that you will be making at retirement that will affect your long-term well-being. You may want to do a new post if you want more advise on claiming SS or annuities. The Bogelhead wicki also has solid information.
Thanks for your many suggestions.....I think what I am leaning towards is to leave all in the L2020 which is where I am now, except about 50K rolled to a Vanguard fund which I will have access to for any kind of life emergencies. I've never been not crazy about annuities, but maybe I'll take a look at the TSP annuity again too since I have no heirs.

Not married but will need SS at 62 ( turning this winter) as well as my federal retirement and access to tsp monthly to live on. Retiring due to health issues this December after 27 yrs at PO.

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Rosebud
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Re: What to do with 401K portfolio moving from TSP Gov

Post by Rosebud » Wed Sep 10, 2014 12:17 am

grabiner wrote:The reason to leave money in the TSP is the G fund, which is better than anything available at retail; Vanguard has comparable funds to the F, C, S and I funds at barely higher costs.

Therefore, if you have more in the TSP than you will want to have in the G fund, you can make your one partial withdrawal from the TSP to roll part of it into a Vanguard IRA, leaving the rest of the TSP in the G fund until you are ready to annuitize it or spend it gradually, and using the Vanguard IRA for unscheduled expenses.
+1
I took about 3/4 of the money in my TSP account and moved it to Vanguard when I retired in 2008. The abysmal investing opportunities for the next several years made me once again appreciate the value of access to the G Fund. Ultimately, I ended up moving some of the money from Vanguard back to the TSP. The money left in Vanguard is largely so that I will have easy ability to take out money almost immediately, if needed. I highly recommend that you keep your TSP account open, while at the same time moving some of the funds to Vanguard.

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Re: What to do with 401K portfolio moving from TSP Gov

Post by kazper » Wed Sep 10, 2014 4:23 am

Rosebud wrote:
grabiner wrote:The reason to leave money in the TSP is the G fund, which is better than anything available at retail; Vanguard has comparable funds to the F, C, S and I funds at barely higher costs.

Therefore, if you have more in the TSP than you will want to have in the G fund, you can make your one partial withdrawal from the TSP to roll part of it into a Vanguard IRA, leaving the rest of the TSP in the G fund until you are ready to annuitize it or spend it gradually, and using the Vanguard IRA for unscheduled expenses.
+1
I took about 3/4 of the money in my TSP account and moved it to Vanguard when I retired in 2008. The abysmal investing opportunities for the next several years made me once again appreciate the value of access to the G Fund. Ultimately, I ended up moving some of the money from Vanguard back to the TSP. The money left in Vanguard is largely so that I will have easy ability to take out money almost immediately, if needed. I highly recommend that you keep your TSP account open, while at the same time moving some of the funds to Vanguard.
Keyword here is SOME. You should have some emergency money that is easily accessible. The only reason to move out of the tsp is because you want to slice and dice something not offered in the tsp. even if you went that route, don't pull everything out, just some.

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