Retirement Portfolio Help (ROTH with Vanguard and TSP)

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Topic Author
jamesmath
Posts: 2
Joined: Mon Oct 14, 2019 10:09 am

Retirement Portfolio Help (ROTH with Vanguard and TSP)

Post by jamesmath » Mon Oct 14, 2019 9:25 pm

Emergency funds: Six months of expenses in Certificate of Deposit at Penfed Credit union

Debt: None

Tax Filing Status: Single

Tax Rate: 22% Federal, 0% State (Active Duty Military)

State of Residence: IL

Age: 32

Desired Asset allocation: Unsure on what this number should look like my guess is
90% stocks / 10% bonds

Desired International allocation: Unsure on what this number should look like my guess is
40% of stocks

Total value in dollars invested approximately 130k

-Retirement Investments

Taxable
32.2% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%) + (0.3% advisor fee)

His Traditional IRA with the Thrift Savings Plan (TSP)
10.1% L 2050 TSP fund (.047%)
Company match? No

His ROTH Thrift Savings Plan (401K for Government employees)
8.7% L 2050 (.047%)
13.9% C Fund (.042%)
5.3% S Fund (.061%)
1.5% I Fund (.051%)
Company match? No

His Roth IRA at Vanguard
2.9% Vanguard Total Stock Market Index Fund (VSTAX) (.04%) + (0.3% advisor fee)
25.5% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (.11%) + (0.3% advisor fee)

Contributions

New annual Contributions
$19,000 to his ROTH TSP (monthly contribution split 70% towards C Fund and 30% towards S Fund)
$6,000 his Roth IRA
$1,200 taxable (for retirement, not short term goals)

Available funds for TSP

https://www.tsp.gov/PlanParticipation/B ... Funds.html

Funds available in his TSP ROTH
Lifecycle fund (L 2050) (.047%)
The Government Securities Investment (G fund) (.04%)
The Fixed Income Index Investment (F Fund) (.057%)
The Common Stock Index Investment (C Fund) (.042%)
The Small Capitalization Stock Index (S Fund) (.061%)
The International Stock Index Investment (I Fund) (.051%)


Questions:
1. Does my portfolio allocation look in order? Is it doubling up or to weighted in one area? To risky? Not Enough risk? I plan to be in the military for another 10 years and working total for another 25 years.

2. Should I be taking more risk or International funds in my TSP?

3. Does TSP contribution allocation look right for the long haul?

4. Any suggestions for portfolio allocation research or education would be greatly appreciated

Hello all I am very new to portfolio management and I have concerns if I am in the right direction. I was wondering if some of the wiser heads on here wouldn't mind looking at my portfolio to see if I am doubling up or making any rookie mistakes. Whenever I seek help through 3rd party advisors they all feel like sales pitches. I am currently using Vanguard Investor services which has been a pleasant experience so far but they are not concerned with anything dealing with my TSP allocation (company 401K equivalent for government employees). Soon my TSP account will outweigh my vanguard accounts and I want to ensure the two are in lockstep for the most beneficial plan.

Thank you for your time,

James

PS In case you are unfamiliar with the TSP funds here are a couple of websites explaining them. Essentially C fund is mirroring S&P 500, S fund is US small & mid-cap, and L 2050 is a life cycle fund.

https://www.tsp.gov/PlanParticipation/B ... Funds.html

https://www.investopedia.com/articles/i ... -funds.asp
Last edited by jamesmath on Tue Oct 15, 2019 7:03 pm, edited 2 times in total.

animarising
Posts: 13
Joined: Tue Mar 20, 2018 12:02 am

Re: Retirement Portfolio Help (ROTH with Vanguard and TSP)

Post by animarising » Mon Oct 14, 2019 10:43 pm

Unfortunately, I don't know what the various funds you listed are - I'm not in the military, only invest with Vanguard as a private citizen. So your investments in the Total Stock Market and Total International Stock market are all that make sense to me.

As someone just entering retirement, I wish that Roths had been available earlier in my career, and that I had maxed out within them. It's my intention to get all of my deferred tax retirement savings into Roth before I hit 70. So that's my best advice - you're young, so as long as you can weather the ups and downs being 80-20% or thereabouts should be good for you. I only reluctantly went 60-40 (from 70-30) this past year.

For my bond investments, I got lucky and followed the advice that Vanguard's Economists put out last December. That entailed going with Treasuries (LT, ST, TIPS) instead of the Total Bond Funds advocated by the Vanguard Advisors. And was that ever a good strategy - every time the market bombed down, my treasuries rose up. YTD, I've seen a $74k gain so even with taking income every month, I've got more assets than when I started the year.

Feels good! You'll be fine if you just keep investing . . . .

Fishing50
Posts: 371
Joined: Tue Sep 27, 2016 1:18 am

Re: Retirement Portfolio Help (ROTH with Vanguard and TSP)

Post by Fishing50 » Tue Oct 15, 2019 11:44 am

Putting your question in the following format will help with more detailed responses, many people here are familiar with TSP.
viewtopic.php?f=1&t=6212
If desired, you can make edits to your original post using the pencil in the upper right corner.

You are doing well investing max contributions at your age, keep it up.

I see the following as your investing priorities, hopefully it aligns with Vanguard Investor services:

1. Keep only total stock market and total intl equity index funds in taxable account for favorable tax treatment of dividends and capital gains.
2. Keep equities in Roth IRA account to take advantage of long term, tax-free growth.
3. Keep entire bond allocation in TSP G & F Fund.
4. After bonds, allocate the rest of TSP 4/1 C & S Funds.

Roth TSP is likely the correct choice in the 22% tax bracket with a future pension. Traditional or a mix of Roth and traditional may make sense in 2026 when tax rates change back.
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

peseta
Posts: 116
Joined: Mon Mar 09, 2015 11:40 pm

Re: Retirement Portfolio Help (ROTH with Vanguard and TSP)

Post by peseta » Tue Oct 15, 2019 8:54 pm

Not sure why you have money in the L2050 and in other funds. The lifecycle funds are target funds and the idea is to put everything in the fund, otherwise it defeats the purpose.

As a fellow fed, I do things a bit differently. I have all my family's funds in either the applicable workplace lifecycle fund or the Vanguard equivalent. So, you could just put everything in the TSP in L2050, and everything in Vanguard in their 2050 index target fund. Yes, you'll pay a bit in tax in your taxable, though not much as it's very tax-efficient. Yes, the glidepaths of the L2050 and the Vanguard equivalent are a bit different, but they are close enough.

I'm on the "simplicity is bliss" team. You can make your portfolio real simple, if that's what you want.

peseta

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Taz
Posts: 408
Joined: Tue Jan 13, 2009 9:10 am
Location: Florida

Re: Retirement Portfolio Help (ROTH with Vanguard and TSP)

Post by Taz » Tue Oct 15, 2019 9:19 pm

Hi James,

Trying to mix a target date fund with individual funds plus having other funds and partial management elsewhere is a chore. Looks like you have about 4% bonds (18.8% of 19% G + F in L2050) in your overall portfolio. If you moved all of your TSP into L2050 then it would move towards your 10% fixed quickly and then edge towards 20% as you continue to contribute to the L fund. You might need to tweak your TSP contribution to add more fixed over time.

Or, get rid of the L fund and massage it by hand. Or, as peseta recommends go with the Vanguard 2050.

Regarding the percentage of international, Vanguard has you at 35% as is the L2050 right now. There is no right answer. My stock allocation is 10-15% international so going all target date funds would not work for me. Others might be as low as 0 or high as 40%.

You really aren't getting much out of the VPAS at this point Recommend the Boglehead's Guide to Investing and DIY.

Cheers,
TAZ
The destination matters.

Topic Author
jamesmath
Posts: 2
Joined: Mon Oct 14, 2019 10:09 am

Re: Retirement Portfolio Help (ROTH with Vanguard and TSP)

Post by jamesmath » Fri Oct 18, 2019 6:18 am

Thank you for all of the replies, I have edited the post appropriately. I really hope to see more but worry this post has now become buried. Can someone please point me in the direction of the Boglehead's Guide to Investing and DIY section I cannot seem to find it.

Fishing50
Posts: 371
Joined: Tue Sep 27, 2016 1:18 am

Re: Retirement Portfolio Help (ROTH with Vanguard and TSP)

Post by Fishing50 » Fri Oct 18, 2019 10:48 am

Jamesmath- Your portfolio looks good, which probably limits comments.
1. 90/10 is a reasonable asset allocation 25yrs from retirement with a probable pension. Manage your asset allocation across all accounts, and TSP size will not be a problem.

2. Yes, you can add international fund in TSP or even better in taxable to take advantage of foreign tax credit. As others have said, your use of target date funds isn’t optimal.

3. Yes.

4. Your doing fine, keep contributing the max. Study up on tax loss harvesting, so you ready for the next correction. I recommend getting more of your emergency invested because you have significant taxable assets. Big ERN thoughts will help https://earlyretirementnow.com/2018/04/ ... in-stocks/

Your doing well, 3rd party advisors have little to offer you.
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

HeelaMonster
Posts: 124
Joined: Sat Aug 10, 2019 11:46 am

Re: Retirement Portfolio Help (ROTH with Vanguard and TSP)

Post by HeelaMonster » Fri Oct 18, 2019 12:54 pm

James,

You are doing well. I can only second what others have said...

* I am at the other end of govt service (hint: my TSP account is L2020, rather than L2050). I am a fan of the Lifecycle funds, and agree that there is little point in spreading things around to invidual funds, if you are comfortable with allocation in the L2050. I really came to appreciate the simplicity of contributing to one place and letting them dial it in with regular, scheduled adjustments. Take a look at that pie chart, slide the bar to the right, and if you like the projected allocation of that glide path.... keep it simple and let it ride! The beauty of TSP is that you can consolidate with the click of a button, and without creating taxable events.

* One thing I wish I would've attended to sooner was the downside of over-contributing to tax-deferred accounts. All my TSP money is in traditional (not Roth)... so I am now entering a phase of conversions over the next several years, as I enter retirement, so I don't get buried later by excessive Rerquired Minimum Distributions (RMDs). It looks like you are taking advantage of Roth options inside TSP, which is good.

* I also like your use of Vanguard funds. To be honest, your portfolio looks like where I am trying to get, having started out many years ago with "a little of this, a little of that." I am still saddled with some clutter, from the days before I discovered low cost index funds.

* Agree that third party advisors aren't worth what they'll cost you, if you have any interest and capacity for DIY. Based on what you're done so far, I predict you'll do just fine, with occasional reality checks from BH, as needed.

Good work, and thanks for your military service. :sharebeer

rkhusky
Posts: 7842
Joined: Thu Aug 18, 2011 8:09 pm

Re: Retirement Portfolio Help (ROTH with Vanguard and TSP)

Post by rkhusky » Fri Oct 18, 2019 12:59 pm

Unless you expect your pay to increase substantially over the next 10 years, say 3x+ of what you are making now, I suggest you use Traditional TSP (or at least 50/50 between the Roth/Traditional) and Roth IRA. Invest the tax savings in your taxable account.

For simplicity, use Lifecycle 2050 in Roth/Traditional TSP, Target Retirement 2050 in Roth IRA, and Total Stock Market in taxable. With that simple portfolio, there is no need to pay 0.3% for portfolio advice.

retired@50
Posts: 1016
Joined: Tue Oct 01, 2019 2:36 pm

Re: Retirement Portfolio Help (ROTH with Vanguard and TSP)

Post by retired@50 » Fri Oct 18, 2019 1:05 pm

jamesmath wrote:
Fri Oct 18, 2019 6:18 am
Thank you for all of the replies, I have edited the post appropriately. I really hope to see more but worry this post has now become buried. Can someone please point me in the direction of the Boglehead's Guide to Investing and DIY section I cannot seem to find it.
Click the "Wiki" link at the top of the Bogleheads web page. You'll be able to navigate to all sorts of topics. Best of luck.
Boggle - a game from Parker Brothers. Bogle - investor, founder of Vanguard.

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