Need TSP Withdraw Help (Math Help)

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grettman
Posts: 466
Joined: Mon Sep 29, 2014 1:47 pm

Need TSP Withdraw Help (Math Help)

Post by grettman » Mon Sep 23, 2019 5:49 am

I am taking care of my mom's finances because she has Alzheimers.

Let's assume she has $200,000 in TSP. It is all in the G fund. She is taking the RMD.

I want to move $100,000 of that balance to C fund. I want to add a little risk to her overall portfolio to increase returns.

My thought was to not have the C fund portion touch for at least 5 years so that it can grow. However, TSP tells me the RMD must come from both the G and C fund (pro rata fashion).

It makes no sense to me to put the money in the C only to have some of it sold off.

My question is: Mathematically how will this forced method of distribution change things? Assume that the C fund rises 5% (or decreases 5%) and the G fund rises 2% over the same period. How can I figure this out? No, I am not good at math and that is why I am asking for help. Please don't challenge why I want to do this move. I might add that as a topic in another thread but for now I am looking at the math part of this problem.

Thanks!

rkhusky
Posts: 7606
Joined: Thu Aug 18, 2011 8:09 pm

Re: Need TSP Withdraw Help (Math Help)

Post by rkhusky » Mon Sep 23, 2019 7:26 am

grettman wrote:
Mon Sep 23, 2019 5:49 am
However, TSP tells me the RMD must come from both the G and C fund (pro rata fashion).
After the RMD, simply rebalance back to having the C balance equal $100K.

You start with $100K/$100K in G/C. You withdraw $4K. Now you have $98K/$98K. The next day rebalance to $96K/$100K, which is approximately 49/51 (Interfund Transfer).

I do have to note that just because you invest in C doesn't necessarily mean that it will grow faster than G. We could have a market crash starting tomorrow that drops your C balance down to $50K and it might not reach $100K again for a few years. It is likely that it will grow faster, but there are no guarantees with stock investing.

delamer
Posts: 9344
Joined: Tue Feb 08, 2011 6:13 pm

Re: Need TSP Withdraw Help (Math Help)

Post by delamer » Mon Sep 23, 2019 9:35 am

rkhusky wrote:
Mon Sep 23, 2019 7:26 am
grettman wrote:
Mon Sep 23, 2019 5:49 am
However, TSP tells me the RMD must come from both the G and C fund (pro rata fashion).
After the RMD, simply rebalance back to having the C balance equal $100K.

You start with $100K/$100K in G/C. You withdraw $4K. Now you have $98K/$98K. The next day rebalance to $96K/$100K, which is approximately 49/51 (Interfund Transfer).

I do have to note that just because you invest in C doesn't necessarily mean that it will grow faster than G. We could have a market crash starting tomorrow that drops your C balance down to $50K and it might not reach $100K again for a few years. It is likely that it will grow faster, but there are no guarantees with stock investing.
Yes, just rebalance.

It will be easier to do if you take the RMD out annually or quarterly, rather than monthly.

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