TSP and otherwise for income

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Dlofstead4
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Joined: Mon Feb 12, 2018 7:22 pm

TSP and otherwise for income

Post by Dlofstead4 » Mon Feb 12, 2018 8:04 pm

I recently retired and will be withdrawing 1800 monthly from my TSP to supplement FERS and SS. Currently my TSP balance is 600k. I have moderate to high risk tolerance.

Since monthly withdrawals are taken proportionately from each of my TSP fund allocations, is it advisable to withdrawal a lump sum for monthly income purposes and roll into an outside investment account or keep that same sum in G and interfund transfer the monthly withdrawals amount to C,S or I as I receive the payments? Did I articulate this clearly cause it sure doesn't seem like it lol?

delamer
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Re: TSP and otherwise for income

Post by delamer » Mon Feb 12, 2018 9:00 pm

Not sure what you are getting at. If you are withdrawing the money to cover expenses, then why would you consider reinvesting it?

Since the money is taken out proportionally, your asset allocation will not change within your TSP due to the withdrawals.

ionball
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Re: TSP and otherwise for income

Post by ionball » Mon Feb 12, 2018 9:22 pm

I think it would be better to work within the TSP alone rather than add a separate account to act as a buffer for cash flow. Perhaps increase your G fund allocation enough to cover one year expense (or whatever interval you choose) and do interfund transfers to keep your allocations in balance. If this doesn't address your question it might help if you could list your current TSP allocations and give an example of the transactions you're considering.

chuckb84
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Location: New Mexico

Re: TSP and otherwise for income

Post by chuckb84 » Mon Feb 12, 2018 9:43 pm

Dlofstead4 wrote:
Mon Feb 12, 2018 8:04 pm
I recently retired and will be withdrawing 1800 monthly from my TSP to supplement FERS and SS. Currently my TSP balance is 600k. I have moderate to high risk tolerance.

Since monthly withdrawals are taken proportionately from each of my TSP fund allocations, is it advisable to withdrawal a lump sum for monthly income purposes and roll into an outside investment account or keep that same sum in G and interfund transfer the monthly withdrawals amount to C,S or I as I receive the payments? Did I articulate this clearly cause it sure doesn't seem like it lol?
Hmmm. If I understand the goal, you want the withdrawals to come entirely from the G fund? Under current TSP rules, the only way to do this is:

1. Right before the TSP withdrawal date, do an interfund transfer so you are 100% G fund.
2. TSP does the monthly withdrawal.
3. Immediately do an interfund transfer so your funds are distributed as you like across the various TSP funds.
5. Repeat this every month.

The problem is what can happen in the market while you're 100% G fund for a few days every month. Personally, I don't think this monthly process is worth the trouble. Just pick an allocation you like between the various funds and rebalance when you hit pre-set limits.

ionball
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Re: TSP and otherwise for income

Post by ionball » Mon Feb 12, 2018 10:50 pm

chuckb84 wrote:
Mon Feb 12, 2018 9:43 pm
Dlofstead4 wrote:
Mon Feb 12, 2018 8:04 pm
I recently retired and will be withdrawing 1800 monthly from my TSP to supplement FERS and SS. Currently my TSP balance is 600k. I have moderate to high risk tolerance.

Since monthly withdrawals are taken proportionately from each of my TSP fund allocations, is it advisable to withdrawal a lump sum for monthly income purposes and roll into an outside investment account or keep that same sum in G and interfund transfer the monthly withdrawals amount to C,S or I as I receive the payments? Did I articulate this clearly cause it sure doesn't seem like it lol?
Hmmm. If I understand the goal, you want the withdrawals to come entirely from the G fund? Under current TSP rules, the only way to do this is:

1. Right before the TSP withdrawal date, do an interfund transfer so you are 100% G fund.
2. TSP does the monthly withdrawal.
3. Immediately do an interfund transfer so your funds are distributed as you like across the various TSP funds.
5. Repeat this every month.

The problem is what can happen in the market while you're 100% G fund for a few days every month. Personally, I don't think this monthly process is worth the trouble. Just pick an allocation you like between the various funds and rebalance when you hit pre-set limits.
I think OP wants to pump up the G fund enough to cover the withdrawals only. Rather than manage interfund transfers monthly, I would suggest increasing the G fund by either $10,800 for a 6 month period or $21,600 for a 12 month period and let the AA drift in between the intervals. That would build a small market buffer and fairly simple to execute. Better still, simply increase the G fund allocation by 4% of total portfolio and rebalance AA as described by chuckb84.

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Watty
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Re: TSP and otherwise for income

Post by Watty » Tue Feb 13, 2018 8:27 am

Just FYI,

Just in case you didn't know the TSP has different, and worse, inheritance rules than an IRA so you might want to consider if it would make sense to role the money out to an IRA.

There is a wiki on this;
https://www.bogleheads.org/wiki/TSP_estate_planning

There may be other permutations but there was a post a while back by someone that had run into this situation.

1) Husband has large TSP
2) He dies and leave it to his wife as a beneficiary participant. She OK
3) She dies a few years later and leaves it to their kid.

The problem is that there is no way for the kid to keep the money in the TSP or roll it out to an inherited IRA so the kids has to withdraw a six figure amount all in one year and pay taxes on it in a very high tax bracket.

If either the father or mother had rolled the money out to an IRA then the kid could have had an inherited IRA and spread the withdrawls out over several decades.
Last edited by Watty on Tue Feb 13, 2018 8:38 am, edited 1 time in total.

rkhusky
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Re: TSP and otherwise for income

Post by rkhusky » Tue Feb 13, 2018 8:31 am

chuckb84 wrote:
Mon Feb 12, 2018 9:43 pm
Dlofstead4 wrote:
Mon Feb 12, 2018 8:04 pm
I recently retired and will be withdrawing 1800 monthly from my TSP to supplement FERS and SS. Currently my TSP balance is 600k. I have moderate to high risk tolerance.

Since monthly withdrawals are taken proportionately from each of my TSP fund allocations, is it advisable to withdrawal a lump sum for monthly income purposes and roll into an outside investment account or keep that same sum in G and interfund transfer the monthly withdrawals amount to C,S or I as I receive the payments? Did I articulate this clearly cause it sure doesn't seem like it lol?
Hmmm. If I understand the goal, you want the withdrawals to come entirely from the G fund? Under current TSP rules, the only way to do this is:

1. Right before the TSP withdrawal date, do an interfund transfer so you are 100% G fund.
2. TSP does the monthly withdrawal.
3. Immediately do an interfund transfer so your funds are distributed as you like across the various TSP funds.
5. Repeat this every month.

The problem is what can happen in the market while you're 100% G fund for a few days every month. Personally, I don't think this monthly process is worth the trouble. Just pick an allocation you like between the various funds and rebalance when you hit pre-set limits.
You don't need the first step. Suppose you had two funds with equal amounts A and B and you want to withdraw amount c from A. The fund manager insists on withdrawing proportionally from all funds, so after the withdrawal, you end up with A-c/2 and B-c/2. All you need do is transfer c/2 from B to A after the withdrawal to achieve fund balances A and B-c. However, the OP would need to do some extra math, because the TSP only allows you to set percentages for the funds, and does not allow the transfer of specific dollar amounts. In this case, the OP wants to maintain amount A, so should set the percentage for A to be round(100*A/(A+B-c)).

Dlofstead4
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Joined: Mon Feb 12, 2018 7:22 pm

Re: TSP and otherwise for income

Post by Dlofstead4 » Tue Feb 13, 2018 5:41 pm

I appreciate all of your responses and efforts to understand what I'm saying.
Full disclosure, I've been meeting with various investment peeps who say the prob with staying in TSP and taking monthly withdrawals is the money is comes from each of my investment funds (20G, 80C), apparently bad if C is down when the disbursement occurs. It doesn't sound like any of you feel this is a big deal?

I really want to stay with TSP and at age 50, I hope I have a lot of years left to make it last. I just don't want to screw it up by being too thrifty to pay an advisor 2.5%.

My peers are on extreme ends, either 100G or 100CSI. There's got to be some ideas for mod high risk out there. I was surprised to not find other similar posts out there. I can manage the idea of placing a year or so worth of withdrawals in G and replenish periodically, as suggested by a few of you.

Dlofstead4
Posts: 5
Joined: Mon Feb 12, 2018 7:22 pm

Re: TSP and otherwise for income

Post by Dlofstead4 » Tue Feb 13, 2018 5:43 pm

Thank you Watty. I didn't think of the tax burden my kids would face with full withdrawal.

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: TSP and otherwise for income

Post by delamer » Tue Feb 13, 2018 6:00 pm

Dlofstead4 wrote:
Tue Feb 13, 2018 5:41 pm
I appreciate all of your responses and efforts to understand what I'm saying.
Full disclosure, I've been meeting with various investment peeps who say the prob with staying in TSP and taking monthly withdrawals is the money is comes from each of my investment funds (20G, 80C), apparently bad if C is down when the disbursement occurs. It doesn't sound like any of you feel this is a big deal?

I really want to stay with TSP and at age 50, I hope I have a lot of years left to make it last. I just don't want to screw it up by being too thrifty to pay an advisor 2.5%.

My peers are on extreme ends, either 100G or 100CSI. There's got to be some ideas for mod high risk out there. I was surprised to not find other similar posts out there. I can manage the idea of placing a year or so worth of withdrawals in G and replenish periodically, as suggested by a few of you.
Consider one of the Lifecycle funds. The 2030 is about 60% stocks, 40% bonds. So moderate risk. The 2040 is more like 75/25, and a bit more risky.

Dlofstead4
Posts: 5
Joined: Mon Feb 12, 2018 7:22 pm

Re: TSP and otherwise for income

Post by Dlofstead4 » Tue Feb 13, 2018 6:08 pm

delamer wrote:
Tue Feb 13, 2018 6:00 pm
Dlofstead4 wrote:
Tue Feb 13, 2018 5:41 pm
I appreciate all of your responses and efforts to understand what I'm saying.
Full disclosure, I've been meeting with various investment peeps who say the prob with staying in TSP and taking monthly withdrawals is the money is comes from each of my investment funds (20G, 80C), apparently bad if C is down when the disbursement occurs. It doesn't sound like any of you feel this is a big deal?

I really want to stay with TSP and at age 50, I hope I have a lot of years left to make it last. I just don't want to screw it up by being too thrifty to pay an advisor 2.5%.

My peers are on extreme ends, either 100G or 100CSI. There's got to be some ideas for mod high risk out there. I was surprised to not find other similar posts out there. I can manage the idea of placing a year or so worth of withdrawals in G and replenish periodically, as suggested by a few of you.
Consider one of the Lifecycle funds. The 2030 is about 60% stocks, 40% bonds. So moderate risk. The 2040 is more like 75/25, and a bit more risky.
A better alternative to replenishing as described previously?

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: TSP and otherwise for income

Post by delamer » Tue Feb 13, 2018 6:20 pm

Dlofstead4 wrote:
Tue Feb 13, 2018 6:08 pm
delamer wrote:
Tue Feb 13, 2018 6:00 pm
Dlofstead4 wrote:
Tue Feb 13, 2018 5:41 pm
I appreciate all of your responses and efforts to understand what I'm saying.
Full disclosure, I've been meeting with various investment peeps who say the prob with staying in TSP and taking monthly withdrawals is the money is comes from each of my investment funds (20G, 80C), apparently bad if C is down when the disbursement occurs. It doesn't sound like any of you feel this is a big deal?

I really want to stay with TSP and at age 50, I hope I have a lot of years left to make it last. I just don't want to screw it up by being too thrifty to pay an advisor 2.5%.

My peers are on extreme ends, either 100G or 100CSI. There's got to be some ideas for mod high risk out there. I was surprised to not find other similar posts out there. I can manage the idea of placing a year or so worth of withdrawals in G and replenish periodically, as suggested by a few of you.
Consider one of the Lifecycle funds. The 2030 is about 60% stocks, 40% bonds. So moderate risk. The 2040 is more like 75/25, and a bit more risky.
A better alternative to replenishing as described previously?

No, I thought you were asking about alternative allocations for now that are not ultra conservative (all G) or very aggressive (all stocks) like your peers.

rkhusky
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Joined: Thu Aug 18, 2011 8:09 pm

Re: TSP and otherwise for income

Post by rkhusky » Tue Feb 13, 2018 7:14 pm

Dlofstead4 wrote:
Tue Feb 13, 2018 5:41 pm
Full disclosure, I've been meeting with various investment peeps who say the prob with staying in TSP and taking monthly withdrawals is the money is comes from each of my investment funds (20G, 80C), apparently bad if C is down when the disbursement occurs. It doesn't sound like any of you feel this is a big deal?
It's no big deal because you can easily rebalance in tax advantaged accounts.

Suppose your portfolio has $2000, $1000 in G and $1000 in C and you plan to withdraw $500. But before you do do so, C drops in half such that you now have $1500 total ($1000 in G and $500 in C). You rebalance by moving $250 from G to C (resulting in $750 in each according to your AA). You now withdraw your $500, which will come equally from G and C, resulting in balances of $500 for each ($1000 total).

If you were unable to rebalance before withdrawing the $500, then $333 will come from G and $167 will come from C, resulting in balances of $667 for G and $333 for C. You can now rebalance by moving $167 from G to C, resulting in balances of $500 for both, just like above.

Dlofstead4
Posts: 5
Joined: Mon Feb 12, 2018 7:22 pm

Re: TSP and otherwise for income

Post by Dlofstead4 » Tue Feb 13, 2018 8:07 pm

rkhusky wrote:
Tue Feb 13, 2018 7:14 pm
Dlofstead4 wrote:
Tue Feb 13, 2018 5:41 pm
Full disclosure, I've been meeting with various investment peeps who say the prob with staying in TSP and taking monthly withdrawals is the money is comes from each of my investment funds (20G, 80C), apparently bad if C is down when the disbursement occurs. It doesn't sound like any of you feel this is a big deal?
It's no big deal because you can easily rebalance in tax advantaged accounts.

Suppose your portfolio has $2000, $1000 in G and $1000 in C and you plan to withdraw $500. But before you do do so, C drops in half such that you now have $1500 total ($1000 in G and $500 in C). You rebalance by moving $250 from G to C (resulting in $750 in each according to your AA). You now withdraw your $500, which will come equally from G and C, resulting in balances of $500 for each ($1000 total).

If you were unable to rebalance before withdrawing the $500, then $333 will come from G and $167 will come from C, resulting in balances of $667 for G and $333 for C. You can now rebalance by moving $167 from G to C, resulting in balances of $500 for both, just like above.
This makes perfect sense!

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grabiner
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Re: TSP and otherwise for income

Post by grabiner » Tue Feb 13, 2018 10:11 pm

chuckb84 wrote:
Mon Feb 12, 2018 9:43 pm
Dlofstead4 wrote:
Mon Feb 12, 2018 8:04 pm
I recently retired and will be withdrawing 1800 monthly from my TSP to supplement FERS and SS. Currently my TSP balance is 600k. I have moderate to high risk tolerance.

Since monthly withdrawals are taken proportionately from each of my TSP fund allocations, is it advisable to withdrawal a lump sum for monthly income purposes and roll into an outside investment account or keep that same sum in G and interfund transfer the monthly withdrawals amount to C,S or I as I receive the payments? Did I articulate this clearly cause it sure doesn't seem like it lol?
Hmmm. If I understand the goal, you want the withdrawals to come entirely from the G fund? Under current TSP rules, the only way to do this is:

1. Right before the TSP withdrawal date, do an interfund transfer so you are 100% G fund.
2. TSP does the monthly withdrawal.
3. Immediately do an interfund transfer so your funds are distributed as you like across the various TSP funds.
5. Repeat this every month.

The problem is what can happen in the market while you're 100% G fund for a few days every month. Personally, I don't think this monthly process is worth the trouble. Just pick an allocation you like between the various funds and rebalance when you hit pre-set limits.
A simpler way to do this, with less distortion:

1. Check your allocation before the withdrawal.
2. Take the withdrawal, which is $X from the G fund and $Y from stock funds.
3. Do an interfund transfer to move $Y from the G fund to stock funds.

Your allocation won't change much this way. Say that you have $100K, which is half in the G fund, and you take a 1% withdrawal. You will now have $49,500 in the G fund, and you wanted $49,000, so you only need to move $500.
Wiki David Grabiner

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