How to compare TSP LifeCycle fund vs. Others

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jason1122
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How to compare TSP LifeCycle fund vs. Others

Post by jason1122 »

Looking at my wife's Federal TSP account: she's:

51% L2040
////
1% G Fund
27% C Fund
14% S Fund
7% I fund

We're both sort of scratching our heads at this since isn't the L2040 just a collection of these other funds? Something got set up a long time ago - and it seems to be working fine - it's saying her rate of return over the past 12 months is 35%. Just trying to wrap our minds around why this is and how to compare it to say a Vanguard 2045 plan.

Is there a tool somewhere where I can enter these values and compare it against other funds?
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grabiner
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Re: How to compare TSP LifeCycle fund vs. Others

Post by grabiner »

It doesn't really make sense to mix a lifecycle fund with individual funds. The advantage of a lifecycle fund is its simplicity: you can hold just one fund, and it will automatically adjust to a reasonable allocation. You lose that advantage if you hold individual funds as well; you have to manage your own allocation as the markets cause it to change, or as your risk tolerance changes, and meanwhile you have the lifecycle fund's own allocation complicating things.

A stock-heavy portfolio will have returns close to those of the stock market, whether it is in a lifecycle fund or mostly in stock funds. For the TSP, everything is indexed, so your return on US stocks will be exactly that of the US stock market., minus the trivial expenses. (To replicate the US market, you would hold C and S funds in a 4:1 ratio; your wife's 2:1 ratio means that she is slightly overweighting small-cap stocks.) The TSP I fund is an index of large-cap developed markets only, which is most but not all of the foreign markets.
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stan1
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Re: How to compare TSP LifeCycle fund vs. Others

Post by stan1 »

TSP L2040 is (from TSP Website):
G Fund 20.70%
F Fund 7.55%
C Fund 36.61%
S Fund 10.03%
I Fund 25.11%

Vanguard TR 2040 is:
48% Total Stock Market
33% Total International Stock Market
13% Total Bond Index
6% International Bond Index

So side by side:
US Equity: They are pretty close
TSP 46.6%
Vg 48%

ex US Equity: Vg has a lot more international
TSP 25.1%
Vg 33%

Bonds: TS{ has more bonds
TSP 28% (including G Fund)
Vg 19%

Smaller differences are that Vanguard includes international bonds and emerging market equities. TSP includes G Fund which is not available anywhere else.

In your wife's case it doesn't really make sense to mix a lifecycle fund with other funds. Just pick an asset allocation and stick with it. If you want the rebalancing features of a lifecycle fund pick the one that matches your desired asset allocation.

Note: I was lazy and did not worry about decimal percentages, sorry if it all doesn't add up to exactly 100%, you get the idea
trueblueky
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Re: How to compare TSP LifeCycle fund vs. Others

Post by trueblueky »

TSP has two control knobs. One for current assets. One for new contributions.

If you want all L-2040, you need to adjust both controls. I would adjust new contributions first. When I was sure that had taken, I would adjust the asset allocation.

Or adjust both at once, then check later to see if some contributions went to the former allocation and adjust again.
delamer
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Re: How to compare TSP LifeCycle fund vs. Others

Post by delamer »

It’s interesting that you are scratching your heads since at some point your wife chose this allocation, either deliberately or by not acting.
If you were enrolled on or after September 5, 2015, then unless you choose another investment option, all contributions received by the TSP will be deposited into the Lifecycle (L) Fund most appropriate for your age.

If you were rehired after a break in federal service, a number of factors affect how your contributions will be invested by default. It is especially important for you to review your statements to ensure your money is being invested according to your wishes.

If you enrolled before September 5, 2015, then until you choose another investment option, all contributions to your account will be deposited into the Government Securities Investment (G) Fund.
https://www.tsp.gov/publications/tspbk30.pdf
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
Mysterious
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Re: How to compare TSP LifeCycle fund vs. Others

Post by Mysterious »

This was very helpful to me in figuring my own TSP situation. Thank you very much.

Here are the TSP fund names and expense ratios that others may find useful.

G fund - Government Securities Investment Fund (0.049)
C fund - Common Stock Index Investment Fund (Match the performance of the S/P 500 index) (0.051)
I fund - International Stock Index Investment Fund (Match the performance of the MSCI EAFE Index) (0.055)
F fund - Fixed Income Index Investment Fund (Match the performance of the Bloomberg Barclays US Aggregate Bond Index) (0.060)
S fund - Small cap stock Index Investment Fund (Match the performance of the Dow Jones US Completion Total Stock Market Index) (0.068)
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grabiner
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Re: How to compare TSP LifeCycle fund vs. Others

Post by grabiner »

Mysterious wrote: Wed Oct 13, 2021 10:06 am This was very helpful to me in figuring my own TSP situation. Thank you very much.

Here are the TSP fund names and expense ratios that others may find useful.

G fund - Government Securities Investment Fund (0.049)
C fund - Common Stock Index Investment Fund (Match the performance of the S/P 500 index) (0.051)
I fund - International Stock Index Investment Fund (Match the performance of the MSCI EAFE Index) (0.055)
F fund - Fixed Income Index Investment Fund (Match the performance of the Bloomberg Barclays US Aggregate Bond Index) (0.060)
S fund - Small cap stock Index Investment Fund (Match the performance of the Dow Jones US Completion Total Stock Market Index) (0.068)
And the G fund is special, which is not clear from its name. The G fund invests in non-marketable Treasury bonds, which have the yield of intermediate-term and long-term Treasury bonds but have no interest-rate risk.

This is a slight reason not to use target-date funds if some, but not all, of your investments are in the TSP. The G fund is a better bond fund than you can get elsewhere, while the other funds have comparable retail options available in an IRA and many 401(k) plans. Therefore, you may want to hold all your bonds in the G fund, rather than hold target-date fund both inside and outside the TSP and hold a lot of your bonds in the equivalent of the F fund.
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jason1122
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Re: How to compare TSP LifeCycle fund vs. Others

Post by jason1122 »

grabiner wrote: Tue Oct 12, 2021 2:33 pm It doesn't really make sense to mix a lifecycle fund with individual funds.
Yes that's what I was assuming. I don't know how it ended up like this - I'm 100% sure she did not intentionally allocate like this. I had her login for the first time a couple months ago just to get a report for curiosity. Should we just reallocate into L2040 or L2045. I don't think she's looking at retirement until at least 2045.
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jason1122
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Re: How to compare TSP LifeCycle fund vs. Others

Post by jason1122 »

stan1 wrote: Tue Oct 12, 2021 7:10 pm TSP L2040 is (from TSP Website):
G Fund 20.70%
F Fund 7.55%
C Fund 36.61%
S Fund 10.03%
I Fund 25.11%

Vanguard TR 2040 is:
48% Total Stock Market
33% Total International Stock Market
13% Total Bond Index
6% International Bond Index

So side by side:
US Equity: They are pretty close
TSP 46.6%
Vg 48%

ex US Equity: Vg has a lot more international
TSP 25.1%
Vg 33%

Bonds: TS{ has more bonds
TSP 28% (including G Fund)
Vg 19%

Smaller differences are that Vanguard includes international bonds and emerging market equities. TSP includes G Fund which is not available anywhere else.

In your wife's case it doesn't really make sense to mix a lifecycle fund with other funds. Just pick an asset allocation and stick with it. If you want the rebalancing features of a lifecycle fund pick the one that matches your desired asset allocation.

Note: I was lazy and did not worry about decimal percentages, sorry if it all doesn't add up to exactly 100%, you get the idea
Thanks so much for this! Is the expense ratio 0.054% on L2040 something to worry about?
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jason1122
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Re: How to compare TSP LifeCycle fund vs. Others

Post by jason1122 »

delamer wrote: Wed Oct 13, 2021 9:30 am It’s interesting that you are scratching your heads since at some point your wife chose this allocation, either deliberately or by not acting.
If you were enrolled on or after September 5, 2015, then unless you choose another investment option, all contributions received by the TSP will be deposited into the Lifecycle (L) Fund most appropriate for your age.

If you were rehired after a break in federal service, a number of factors affect how your contributions will be invested by default. It is especially important for you to review your statements to ensure your money is being invested according to your wishes.

If you enrolled before September 5, 2015, then until you choose another investment option, all contributions to your account will be deposited into the Government Securities Investment (G) Fund.
https://www.tsp.gov/publications/tspbk30.pdf
Ah ok - thanks. Whoa! She must have taken some move to make all her contributions at some point go into her L2040 plan - this line is scary: "If you enrolled before September 5, 2015, then until you choose another investment option, all contributions to your account will be deposited into the Government Securities Investment (G) Fund." She's only 1% G - whoa she dodged something there I'm thinking.
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jason1122
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Re: How to compare TSP LifeCycle fund vs. Others

Post by jason1122 »

Mysterious wrote: Wed Oct 13, 2021 10:06 am This was very helpful to me in figuring my own TSP situation. Thank you very much.

Here are the TSP fund names and expense ratios that others may find useful.

G fund - Government Securities Investment Fund (0.049)
C fund - Common Stock Index Investment Fund (Match the performance of the S/P 500 index) (0.051)
I fund - International Stock Index Investment Fund (Match the performance of the MSCI EAFE Index) (0.055)
F fund - Fixed Income Index Investment Fund (Match the performance of the Bloomberg Barclays US Aggregate Bond Index) (0.060)
S fund - Small cap stock Index Investment Fund (Match the performance of the Dow Jones US Completion Total Stock Market Index) (0.068)
Thanks for this!
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grabiner
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Re: How to compare TSP LifeCycle fund vs. Others

Post by grabiner »

jason1122 wrote: Wed Oct 20, 2021 10:18 am Is the expense ratio 0.054% on L2040 something to worry about?
No; it's an excellent expense ratio. The TSP L funds have the same low expenses as the individual TSP funds they hold. And these expenses are comparable to the lowest retail fund expenses, on index funds from Vanguard, Fidelity, Schwab, and iShares. With expenses below 0.1%, the exact number doesn't matter; the difference between 0.04% and 0.06% is $20 on a $100K account.
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Re: How to compare TSP LifeCycle fund vs. Others

Post by AnnetteLouisan »

grabiner wrote: Wed Oct 13, 2021 11:46 am
Mysterious wrote: Wed Oct 13, 2021 10:06 am This was very helpful to me in figuring my own TSP situation. Thank you very much.

Here are the TSP fund names and expense ratios that others may find useful.

G fund - Government Securities Investment Fund (0.049)
C fund - Common Stock Index Investment Fund (Match the performance of the S/P 500 index) (0.051)
I fund - International Stock Index Investment Fund (Match the performance of the MSCI EAFE Index) (0.055)
F fund - Fixed Income Index Investment Fund (Match the performance of the Bloomberg Barclays US Aggregate Bond Index) (0.060)
S fund - Small cap stock Index Investment Fund (Match the performance of the Dow Jones US Completion Total Stock Market Index) (0.068)
And the G fund is special, which is not clear from its name. The G fund invests in non-marketable Treasury bonds, which have the yield of intermediate-term and long-term Treasury bonds but have no interest-rate risk.

This is a slight reason not to use target-date funds if some, but not all, of your investments are in the TSP. The G fund is a better bond fund than you can get elsewhere, while the other funds have comparable retail options available in an IRA and many 401(k) plans. Therefore, you may want to hold all your bonds in the G fund, rather than hold target-date fund both inside and outside the TSP and hold a lot of your bonds in the equivalent of the F fund.
Yes Bogle himself said do G not F in the TSP. Ive followed that for ten years.
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