1st Post...TSP inter-transfer

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Roguejim
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1st Post...TSP inter-transfer

Post by Roguejim » Thu Mar 02, 2017 1:21 pm

I'm a 59 year old postal worker with about 6 years to retire. I've been in TSP, contributing 10% since 1995 into the C Fund(agency matches first 5%). Prior to the election, I transferred all TSP money into the G Fund, and also kicked up my contributions to 25%. At this same time, an EJ planner advised I transfer into the L20/L30 Funds after the stock market backs off to ~19,200 :confused . Well, I have another free appointment with him, and will see if he wants to modify his previous advice. Just wondering if I should transfer the G Fund money now into the L20/L30 Funds with the market climbing, as it is. Or, wait for some inevitable market correction.

If it matters, I have no other investments, but my wife has a 401k at a new job. No large bills(house is paid). She is 48, so she will be working after I retire. Any advice on the TSP transfer? Thank you.

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AnimalCrackers
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Re: 1st Post...TSP inter-transfer

Post by AnimalCrackers » Thu Mar 02, 2017 3:06 pm

Without knowing more, if I were you I'd:
1) cancel the appointment with the Edward Jones "advisor";
2) see if the local library has a copy of "The Bogleheads' Guide To Retirement Planning," obtain, and read carefully; and,
3) consider exchanging the entire balance of the TSP into the L2020 fund.
"Everybody has a plan until they get punched in the face." -- philosopher Mike Tyson

retirementbound
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Re: 1st Post...TSP inter-transfer

Post by retirementbound » Thu Mar 02, 2017 6:01 pm

I second the advice of cancelling the EJ appointment. I was with them for a little over a year. Their advice is very canned and they are high on fees for what they provide. You can learn what you need to from the Bogleheads Forum, and the Boglehead books.

retiredjg
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Re: 1st Post...TSP inter-transfer

Post by retiredjg » Thu Mar 02, 2017 6:20 pm

You made a mistake when you transferred your entire TSP account into the G Fund. It is certainly understandable, but probably not your best decision. Do not compound this mistake by keeping the money out of the market any longer.

The fact that you sold out indicates your investments were too aggressive for your temperament. Not surprising since 100% stocks is VERY aggressive for your age. Again, understandable but don't make it worse.

You need to be invested in a way that you can stick with through good times and bad times. . Then you won't be tempted to make the same mistake in the future.

Decide what that balance between stocks and bonds is - something you can live with in good times and bad. It might be the Lifestyle 2020 fund which is currently sitting at 41% stocks and 59% bonds. That asset allocation is one of many that is appropriate for your age and situation.

Once you decide, put it all in there now. You've already seen what can happen with you let your money sit on the sidelines. If you continue sitting out, that might just get worse.

Cancel the EJ appointment. This advisor has given you pretty questionable advice so far. What if the market doesn't go below that number for another 10 years? Besides, but he is just lying in wait for you to retire so he can tell you to move your money to EJ so he can manage it for you....for which you will pay dearly.

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Roguejim
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Re: 1st Post...TSP inter-transfer

Post by Roguejim » Fri Mar 03, 2017 3:10 am

Thank you everyone for the sage advice.

retiredjg/others, won't the L20 fund close out before I retire, if I work until 2023?

I'm not as afraid of risk as it may seem. When I first began contributing to the C Fund in 1995, I never looked at it again until before the election. It was more of an ignorant decision than a fearful one to dump it into the G Fund. If there is a better option than the L20, even if it might be more risk, please don't hesitate to suggest it.

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BL
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Re: 1st Post...TSP inter-transfer

Post by BL » Fri Mar 03, 2017 3:32 am

Do not, under any circumstances, move the TSP to EJ when you retire! (Unless you want to get fleeced!)
I expect that is what he is hoping for. He/she is not your friend, you are his future meal ticket.

With your retirement, you probably won't even need the TSP money for a good while. They have the best rates around, so stay there. Only transfer to a place like Vanguard, Fidelity, or other non-advisor possibilities with low-ER index funds, if you need to start withdrawing money. You might as well fund your retirement rather than an advisor's retirement.

The L20 fund should eventually turn into the income fund and stay there. You need to decide what stock/bond ratio you want. Age in Bonds is a fairly conservative choice. Perhaps choose a later date if you won't need it until later, or just change it in a couple years.

retiredjg
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Re: 1st Post...TSP inter-transfer

Post by retiredjg » Fri Mar 03, 2017 8:48 am

Roguejim wrote:retiredjg/others, won't the L20 fund close out before I retire, if I work until 2023?
It just merges into the L Income fund and stays there.
I'm not as afraid of risk as it may seem. When I first began contributing to the C Fund in 1995, I never looked at it again until before the election. It was more of an ignorant decision than a fearful one to dump it into the G Fund.
Now think about that for a minute please. Are you sure it was not an ignorant decision based on the fear that things were about to go very wrong and you had to do something to preserve your money? Be honest with yourself. Why would you have even thought taking the "flight to safety" if not for fear?

If there is a better option than the L20, even if it might be more risk, please don't hesitate to suggest it.
It is not a question of what is a "better option". It is a question of what is the best option for you. Picking your stock to bond ratio can be difficult. It will seem too conservative in the good times and it may seem too aggressive in the bad times.

What you know is that 100% stocks was too aggressive for you to stick with during a time of turmoil. So you don't want to do that again (and it was way too aggressive for your age in my opinion). It may be that L2020 is too conservative for you. L 2030 is sitting at 63% stocks and 37% bonds. That's a reasonable number. Does that seem better to you?

I'm thinking you might want to go half and half and see how it goes. What you do not want to do is wait til the market drops to put your money back in. You could be in for a very long wait. Or not. Nobody knows.

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Roguejim
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Re: 1st Post...TSP inter-transfer

Post by Roguejim » Fri Mar 03, 2017 2:12 pm

retiredjg wrote:
Roguejim wrote:retiredjg/others, won't the L20 fund close out before I retire, if I work until 2023?
It just merges into the L Income fund and stays there.
I'm not as afraid of risk as it may seem. When I first began contributing to the C Fund in 1995, I never looked at it again until before the election. It was more of an ignorant decision than a fearful one to dump it into the G Fund.
Now think about that for a minute please. Are you sure it was not an ignorant decision based on the fear that things were about to go very wrong and you had to do something to preserve your money? Be honest with yourself. Why would you have even thought taking the "flight to safety" if not for fear?

If there is a better option than the L20, even if it might be more risk, please don't hesitate to suggest it.
It is not a question of what is a "better option". It is a question of what is the best option for you. Picking your stock to bond ratio can be difficult. It will seem too conservative in the good times and it may seem too aggressive in the bad times.

What you know is that 100% stocks was too aggressive for you to stick with during a time of turmoil. So you don't want to do that again (and it was way too aggressive for your age in my opinion). It may be that L2020 is too conservative for you. L 2030 is sitting at 63% stocks and 37% bonds. That's a reasonable number. Does that seem better to you?

I'm thinking you might want to go half and half and see how it goes. What you do not want to do is wait til the market drops to put your money back in. You could be in for a very long wait. Or not. Nobody knows.
Thank you again everyone for answering my questions. I'm slowly working my way through all the educational material on this site. If there's a suggested book list on this site, I'll find it...

retiredjg, clearly, I need to educate myself since I don't even understand the basics of stock to bond ratio. I understand it is a way of managing risk. So, if I split my money between the L20 and L30, the L20 would merge into the L Income in 2020, and I would have to transfer the L30 into the L Income at retirement, which will be in 2023. Have I got this right?

retiredjg
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Re: 1st Post...TSP inter-transfer

Post by retiredjg » Fri Mar 03, 2017 4:13 pm

Roguejim wrote:retiredjg, clearly, I need to educate myself since I don't even understand the basics of stock to bond ratio. I understand it is a way of managing risk.
Yes.
So, if I split my money between the L20 and L30, the L20 would merge into the L Income in 2020, and I would have to transfer the L30 into the L Income at retirement, which will be in 2023. Have I got this right?
Half right. The L20 will get there whenever it does (I didn't check). You do not ever have to transfer the L30 into anything unless you want to. It will also arrive at L Income at some point.

I suggested mixing the two in case you felt like L20 is too conservative and L30 is too aggressive. YOu can do whatever mix you want. After that, the funds will continue their migration toward L Income. If that suits you, there is nothing to do - eventually it will all get to L Income. However, if you want a stock to bond ratio that is higher than L Income you can choose that too, either by picking a different mix or by using the individual C,S, I, F, and G funds.

If you have not found it already, here is a place to start the Wiki. https://www.bogleheads.org/wiki/Main_Page - click on "getting started". Also there is a good page on the TSP. You can find it with the search box.

rkhusky
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Re: 1st Post...TSP inter-transfer

Post by rkhusky » Sat Mar 04, 2017 7:32 am

Roguejim wrote: So, if I split my money between the L20 and L30, the L20 would merge into the L Income in 2020, and I would have to transfer the L30 into the L Income at retirement, which will be in 2023.
The TSP Lifecycle funds gradually get more conservative with time (see https://www.tsp.gov/InvestmentFunds/Fun ... L2020.html). By July 2020, the L2020 fund will be at 20% stock/80% bonds. Then it will be exactly the same as L Income and all L2020 shares will be rolled into L Income. You just need to decide what ratio of stocks to bonds you want. I view that in the light of stocks losing 50% of their value and not getting back to the current level for 5-10 years (which I realize is more pessimistic than the downturns we've seen in recent years). If that happened, how would it affect your retirement plans?

Age in bonds is a typical conservative asset allocation, which is where L2020 is right now for you. However, it will quickly get more conservative than that. You may be better served either with L2020/L2030 in a 50/50 split, which is still somewhat conservative (you would be at 63% bonds in 2023) or with all in L2030, since your wife is 10 years younger (you would be at 46% bonds at age 65 and 80% bonds when she is 62). Is she planning to work until 65 too?

You should really consider your joint portfolio though, to get a more complete picture of your retirement accounts.

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