keep the TSP or transfer to Schwab?

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4nwestsaylng
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keep the TSP or transfer to Schwab?

Post by 4nwestsaylng »

I have about 40 percent of my assets in Schwab, very happy with staying there.It is about 50% in Schwab Intelligent portfolios, 40% in VTI, and 10% in a few individual stocks.

60 percent of my assets are in the Thrift Savings Plan. My AA is 50/50, so most of the TSP is in fixed, with half in the G fund, and the rest in the L-income fund (which is an 80 fixed/20 equity fund), so effectively my TSP is a 90 fixed/20 equity, with most of the fixed having a stable value, albeit low interest rate of 2.25%.

In the Schwab account, I have found that the SIP has been outperforming the VTI the past eight months by about 3 percent. I am retired, and considering adding the SIP Advisory service, essentially it is a certified financial planner who looks at the whole picture etc.. I know, some will already be saying "hand holding, etc.", I know the drill.

The total fee for Advisory is 0.28% of SIP assets, not total assets, and that includes the expense ratio for the ETFs I believe (not sure). So I would get advice on my whole financial picture, allocation, etc, but would not have my total AA (Schwab + TSP) hit with the fee.

I have not received any pressure to transfer the TSP into Schwab, they said I can keep it, but that it does make it more challenging to track AA and performance compared to it all being in the SIP, but that it is my call.

I am going to keep the TSP open, since if you close it you can't go back in , but wondering whether to transfer some of the TSP funds into a Schwab retirement account to manage it. My leaning is to keep it in the TSP and just have the advisor look at the allocation.

Does anyone have experience with using Schwab Advisory? So far have been happy with some of my funds being in the SIP. The cash drag issue I think is moot, since performance overall has still beat the VTI, even with diversification out of equities. With SIP you can "dial" the equity percent you want, mine is currently at 60 percent, so actually my overall AA is more like 40%equity/60% fixed when the TSP is factored in.
HIinvestor
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Re: keep the TSP or transfer to Schwab?

Post by HIinvestor »

We have kept H’s TSP there and it has done fine in the G fund, which is what the bulk is invested in. One if the drawbacks for us is that you have to use their tables for required Minimum Distribution, which only considers the age of the employ instead of also considering younger spouse’s age. This is the major downside but even with having to withdraw more than we’d otherwise want, we’ve been fine leaving the funds in TSP.

TSP also has few investment options and few withdrawal options, which can also matter to folks (fine for us).
stan1
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Re: keep the TSP or transfer to Schwab?

Post by stan1 »

Over the next two years the TSP will be making changes to have more flexible withdrawal options as well as change the index used by the I fund from a Europe/Asia Large Cap fund to an All World Ex US index. The details and specific timelines have not been announced yet but if it was me I would give them time to sort these out now that they are working on improvements.

What you'd want to do is view your whole portfolio across all your accounts as a single asset allocation. Decide what percentage you want in stocks and what percentage you want in fixed income. The G Fund is unique; Schwab or Vanguard do not have an equivalent product available to purchase. If you are a low risk/conservative investor who likes the fact that the G Fund does not lose value you would not want to pull a lot of money out of the TSP.
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Watty
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Re: keep the TSP or transfer to Schwab?

Post by Watty »

One thing to research is the TSP inheritance laws which are less favorable then for IRA's. I don't think that changed with the recent modernization act but I am not sure about that.

https://www.bogleheads.org/wiki/TSP_estate_planning

There was a post awhile back where the poster run into this situation.(some of the terms may not be exact)

1) Father had a large TSP, he died and left it to his wife.
2) The wife left the funds in the TSP as some sort of beneficiary participant account, for her this was OK.
3) The wife died and left it to their kid. The kid could not keep the money as a beneficiary participant account and they could not roll it out to an inherited IRA because the TSP rules do not allow that.
4) The kid had to withdraw all the money from the TSP which was taxed at a very high tax rate and they lost decades of tax advantaged investing.

If the Mother or Father had rolled the money into an IRA at some point the kid could have a large inherited IRA right now and only have to take RMD's from it.
Topic Author
4nwestsaylng
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Re: keep the TSP or transfer to Schwab?

Post by 4nwestsaylng »

stan1 wrote: Sat Jan 27, 2018 6:19 pm
What you'd want to do is view your whole portfolio across all your accounts as a single asset allocation. Decide what percentage you want in stocks and what percentage you want in fixed income. The G Fund is unique; Schwab or Vanguard do not have an equivalent product available to purchase. If you are a low risk/conservative investor who likes the fact that the G Fund does not lose value you would not want to pull a lot of money out of the TSP.
I agree, I look at my total AA, that is why most of the TSP is in fixed income, the G fund. I note that even in their target funds, they go no more than 6 percent in the F fund (aggregate bond index), keeping most in the G fund. Outside brokerages classify the G fund as a "stable value fund", but unlike such stable value funds on the outside, the expense ratio is about 0.03 for the G fund, and the T bills are specifically issued to the G fund, they do not trade.

I will have to look at the inheritance rules as Watty has suggested. I find it hard to believe that a beneficiary could not roll into their own IRA fund, but it may be a weird rule, it makes no sense.
HIinvestor
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Re: keep the TSP or transfer to Schwab?

Post by HIinvestor »

When TSP reveals their new rules and options in the near future, we can I’ll carefully consider them. For now, TSP is part of our big portfolio—the bond portion.

It would be upsetting if our kids had to withdraw whatever TSP balance we have all in one lump sum after the 2nd to die (likely me). Hopefully the new withdrawal options will allow more flexibility.

The management fees for TSP are attractively low.
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Jerry55
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Re: keep the TSP or transfer to Schwab?

Post by Jerry55 »

4nwestsaylng wrote: Sat Jan 27, 2018 4:10 pmI am going to keep the TSP open, since if you close it you can't go back in , but wondering whether to transfer some of the TSP funds into a Schwab retirement account to manage it. My leaning is to keep it in the TSP and just have the advisor look at the allocation.


I'll stop right there. Keep the TSP as an option. ALWAYS. However, the poster above noted some idiosyncrasies if you die, then your wife should
certainly move it, or most of it, because of the ensuing issues that can hit the children / inheritors really hard. Think Hard about that issue.

I'm single, so my directions to my heirs are to open an Inherited IRA account with Vanguard, and have the TSP transfer their shares directly there.
They know the consequences. Good luck and enjoy.
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!
Helo80
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Re: keep the TSP or transfer to Schwab?

Post by Helo80 »

As others have said, always keep a small balance in TSP like $1 or 2 grand. I believe the minimum balance is either $250 or $500 before TSP will cut you a check and automatically close your account.
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4nwestsaylng
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Re: keep the TSP or transfer to Schwab?

Post by 4nwestsaylng »

Thanks all for the responses. Currently my TSP is about 200k greater than my Schwab, so I am about 60 percent bonds, all in TSP G fund. So at most, to get to a 50/50 AA, I might transfer 200k out of TSP into a Schwab IRA. Alternately I could get to 50/50 just by adding some stock fund within the TSP, such as having a portion in the L-fund, which is essentially an 80 bonds/20 stocks, and 74% of the 80% bonds is the G fund.

Right now with what the market is doing, think I will keep all the TSP in the G fund, as share price is guaranteed not to drop, but of course the return is about 1% less than the aggregate bond index fund.
blaze2051
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Re: keep the TSP or transfer to Schwab?

Post by blaze2051 »

Thanks to all of your comments I just separated and I was debating of rolling over out of the tsp but i might consider having more than one account.

Current employer uses Merrill Lynch for matched 401k. And i used to use Fidelity before. and i do have over 20k in the G fund and NFCU savings account.

I do plan on invest 10% 401k and roth ira total of 20% in Merrill Lynch and roll over some of my tsp into Fidelity account, or use Ameritrade. what you guys suggest. im in my 30's no kids total annual expense is $20,393
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Jerry55
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Re: keep the TSP or transfer to Schwab?

Post by Jerry55 »

2018 TSP G Fund Rate was 2.91%

Now ? I imagine it's fairly close. I'd be happy with it.

https://www.tsp.gov/InvestmentFunds/Fun ... turns.html
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!
ishkadetto
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Re: keep the TSP or transfer to Schwab?

Post by ishkadetto »

The current G Fund rate (May 2019) is 2.5%.
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