TSP

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Mastied
Posts: 3
Joined: Mon May 27, 2019 7:56 am

TSP

Post by Mastied » Wed May 29, 2019 10:21 pm

Question on allocation recommendations. I'm 57, retired Federal worker, I have about 850k in my TSP. I would like to wait till I'm 62 to start using it. I'm very confused on what funds to use for allocation until then. Right now I'm doing G-75%, C-15%, S-10%. Is this to conservative. Lately I can't seem to ride out the bad days, ever since last October I'm down about 60K. Everything I read gives a different train of thought. I'd like to hear what people on this forum has to say. I'm new to this site/forum, but was told that this will be the best information out there, provide your feedback.

peddler12
Posts: 127
Joined: Sat Sep 03, 2011 10:01 pm

Re: TSP

Post by peddler12 » Wed May 29, 2019 11:40 pm

Hello. I'm sticking with the L Funds. The future AA for the L Income fund will be 30 Stocks 70 Bonds. For my retirement I'm going with that when I get to it. I'm 58, but started late. I have to work until 67 which is my desired retirement age.

NxNW
Posts: 20
Joined: Fri Sep 14, 2018 12:15 pm

Re: TSP

Post by NxNW » Wed May 29, 2019 11:46 pm

I will be that guy. More complete information from you will help folks to provide more informed and helpful opinions.

Asking portfolio questions:
viewtopic.php?f=1&t=6212

Small Savanna
Posts: 35
Joined: Sat Feb 09, 2019 2:27 am

Re: TSP

Post by Small Savanna » Thu May 30, 2019 12:00 am

75% G fund seems too conservative. Asset allocation is a personal decision, but 50% to 60% stocks would be more typical for someone in their 50s.
.

MichDad
Posts: 414
Joined: Sat Apr 20, 2013 3:50 pm

Re: TSP

Post by MichDad » Thu May 30, 2019 5:04 am

Welcome to the Forum, Mastied.

It's very difficult to provide useful advice without a more complete picture of your (and, if applicable, your spouse's) overall financial situation. Please follow the link that NxNW sent you. As a retired federal employee, I assume you're also receiving a FERS pension. If your overall financial picture matches your TSP investments, your retirement portfolio would be too conservative for my taste.

MichDad

rkhusky
Posts: 6700
Joined: Thu Aug 18, 2011 8:09 pm

Re: TSP

Post by rkhusky » Thu May 30, 2019 6:43 am

From your numbers it looks like you have $210K in stock in the TSP. You couldn’t have a $60K loss. The market hasn’t dropped that much since October. In fact, it looks to me like any losses, if there were any, would be very small. And the gains in the G Fund would have more than offset any stock losses.

25% in stock is on the conservative side of things, but not wildly so. Do you intend to increase the stock allocation once you get further into retirement? There are those who recommend dropping the stock allocation for a few years around the retirement date.

retiredjg
Posts: 36342
Joined: Thu Jan 10, 2008 12:56 pm

Re: TSP

Post by retiredjg » Thu May 30, 2019 7:07 am

Mastied wrote:
Wed May 29, 2019 10:21 pm
Question on allocation recommendations. I'm 57, retired Federal worker, I have about 850k in my TSP. I would like to wait till I'm 62 to start using it. I'm very confused on what funds to use for allocation until then. Right now I'm doing G-75%, C-15%, S-10%. Is this to conservative. Lately I can't seem to ride out the bad days, ever since last October I'm down about 60K. Everything I read gives a different train of thought. I'd like to hear what people on this forum has to say. I'm new to this site/forum, but was told that this will be the best information out there, provide your feedback.
I think it is important to know how you got to where you are. You must have worked for at least 20 years to retire at 57 with that sizable amount in the TSP. Was it always invested in a conservative manner? Have you changed your stock to bond ratio since you retired? Were you aggressively invested and just never bothered to look at it and all of a sudden it has become scary? Did you sell at the end of last year, while the market was down a little?

Is it too conservative? Not for right now, while you are having trouble riding out the bad days. But it probably is more conservative than you really need to be in the long run. On the other hand, if you find you need to leave it invested in a conservative manner, it does not seem like you will run out of money under most ordinary circumstances.

The thing that is intriguing is that you've already been invested during some actual real bad times, but now you are having trouble with what does not even qualify as a bad time. I think you need to figure out what's going on with that before you consider changing to a different AA.

Lots of people here, including many feds, who can help you figure this out and help keep you on the right track. Welcome to the forum. :happy

User avatar
ruralavalon
Posts: 15698
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: TSP

Post by ruralavalon » Thu May 30, 2019 8:26 am

Welcome to the forum :)

Mastied wrote:
Wed May 29, 2019 10:21 pm
Question on allocation recommendations. I'm 57, retired Federal worker, I have about 850k in my TSP. I would like to wait till I'm 62 to start using it. I'm very confused on what funds to use for allocation until then. Right now I'm doing G-75%, C-15%, S-10%. Is this to conservative. Lately I can't seem to ride out the bad days, ever since last October I'm down about 60K. Everything I read gives a different train of thought. I'd like to hear what people on this forum has to say. I'm new to this site/forum, but was told that this will be the best information out there, provide your feedback.
NxNW wrote:
Wed May 29, 2019 11:46 pm
I will be that guy. More complete information from you will help folks to provide more informed and helpful opinions.

Asking portfolio questions:
viewtopic.php?f=1&t=6212
+ 1, it is better to look at the entire picture and not just one account in isolation. It is often better to coordinate investments across all accounts, in other words treat all accounts together as a single unified portfolio, rather than view each account separately.

At age 57 and retired with a pension there is probably a broad range of asset allocations you could consider. Switching from accumulation, to not accumulating, to spending from retirement accounts is disconcerting, and does require a change in attitude That may be what you are experiencing.

Just for general consideration, here are two good articles on the classic 60/40 stock/bond allocation:
1) Peter Bernstein, Bloomberg Personal Finance (2002) , "The 60/40 Solution"; and
2) Rick Ferri, etf.com (2/25/15), "Wisdom Of 60/40 Portfolios Timeless"".

The first article suggests a 60/40 equity/fixed income as an ideal asset allocation for long-term investors.

The second article suggests a 30/70 equity/fixed income as a basic asset allocation for early retirement.
Last edited by ruralavalon on Thu May 30, 2019 8:29 am, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

rich126
Posts: 450
Joined: Thu Mar 01, 2018 4:56 pm

Re: TSP

Post by rich126 » Thu May 30, 2019 8:28 am

As you accumulate more money and you get closer to needing it, the drops can be more painful to people. Even a 1% drop on 850K is $8,500 and a 10% drop is $85,000. The latter amount could easily cover 1-2 years of expenses for some people.

If you are a retired federal worker you probably have a pension and will also get social security so the drops shouldn't be as painful unless you are constantly looking at the numbers.

You probably want something closer to 40-50% in stocks if you can handle the bad days. Maybe just do a 50/50 split between the G fund and the C fund and avoid the small cap fund since they are often more volatile. Or even 40% in C and 60% in G.

Really depends on the person. Do the "right" thing isn't good if you are going to worry about it.

I'm less than 4 years from retirement and have to admit I think about the drops more than I use to. When you are young it is much easier to just let it accumulate and only check it once a year.

MnD
Posts: 4276
Joined: Mon Jan 14, 2008 12:41 pm

Re: TSP

Post by MnD » Thu May 30, 2019 10:25 am

I'm 56, retired fed and am 70/30 stock/bonds in my overall portfolio which includes the TSP and 6 other accounts.
70% stock is global market cap tracking a fund like Total World Stock but by necessity consisting of several index funds both inside and outside the TSP. The 30% fixed income is 75% TSP G fund and 25% Dodge and Cox Global Bond and will end up 66/34.

We are drawing my pension, my pension supplement and an annually "variable" (fixed percentage of annual overall portfolio balance) from various accounts including the TSP in a tax-wise manner that is historically about as risky as a 3.3% inflation-adjusted SWR. Her Social Security at the optimum time to draw per the opensocialsecurity.com calculator (age 62) will coincidentally replace the FERS supplement which ends for me at age 62. I will draw my SS at age 70 which is not in our budget. We may or may not reduce % spending from portfolio when that time comes 14+ years out. It's silly IMO to make hard decisions about income that's almost 15 years out.

With 4 "safe" non-portfolio sources of income flowing now or in the future that cover all needs and a fair level of wants, I feel I need a conservative bond-like investment portfolio like I need a hole in the head. Others might take the opposite approach and assume a very conservative portfolio in the exact same circumstances. I do not have a fear and scarcity mindset in investing and feel its very important to experience early retirement to the fullest including benefitting from average or better market returns if they come to pass.

I have lately been to several funerals and learned of other misfortunes to others that have resulted in little or no retirement for them or at least not the "happy, healthy, active together" type of one that most people aspire to. The federal retirement system offers an incredible opportunity for those that took full advantage of it via TSP significant contributions to have a relatively early, active and well-financed retirement and I'm not going to squander that.

delamer
Posts: 7841
Joined: Tue Feb 08, 2011 6:13 pm

Re: TSP

Post by delamer » Thu May 30, 2019 10:44 am

A lot depends on how much you expect to withdraw from the TSP once you turn 62.

If your withdrawal needs are small — say less than 2% of the initial balance annually — then you are not hurting yourself by being conservative.

If your withdrawal need are larger — more in the range of 4% — then you need to increase your stock exposure to make your money last.

Spend a few minutes reading this information on the concept of “safe withdrawal rates” to better understand the issue: https://www.bogleheads.org/wiki/Safe_withdrawal_rates

User avatar
Wiggums
Posts: 932
Joined: Thu Jan 31, 2019 8:02 am

Re: TSP

Post by Wiggums » Thu May 30, 2019 11:50 am

I agree. I would focus on your projected retirement expenses and compare that to your retirement savings. That’s a great place to start.

rascott
Posts: 121
Joined: Wed Apr 15, 2015 10:53 am

Re: TSP

Post by rascott » Thu May 30, 2019 12:02 pm

Mastied wrote:
Wed May 29, 2019 10:21 pm
Question on allocation recommendations. I'm 57, retired Federal worker, I have about 850k in my TSP. I would like to wait till I'm 62 to start using it. I'm very confused on what funds to use for allocation until then. Right now I'm doing G-75%, C-15%, S-10%. Is this to conservative. Lately I can't seem to ride out the bad days, ever since last October I'm down about 60K. Everything I read gives a different train of thought. I'd like to hear what people on this forum has to say. I'm new to this site/forum, but was told that this will be the best information out there, provide your feedback.
Your numbers don't compute....how can you be down $60k with only 25% in equities? And the S and C fund prices are almost identical to what they were in October.

You must have sold at the bottom in Dec.

User avatar
Watty
Posts: 16127
Joined: Wed Oct 10, 2007 3:55 pm

Re: TSP

Post by Watty » Thu May 30, 2019 11:24 pm

Mastied wrote:
Wed May 29, 2019 10:21 pm
Question on allocation recommendations. I'm 57, retired Federal worker, I have about 850k in my TSP.
One thing you need to understand is that the TSP inheritance rules are not the same as for an IRA and in some situations it can cause problems for your heirs. There is a wiki on this,

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

There was a post awhile back where where someone had run into this situation;

1) Dad had a large TSP, he died and left it to his wife.
2) Wife left the money in the TSP as a beneficiary participant, that worked OK for her.
3) A few years later the wife died and left the TSP to there kid.

The problem was because of the TSP inheritance rules that the kid could not roll the money out to an inherited IRA and they could also not leave the money in the beneficiary participant account so the kid had to withdraw the money and pay taxes on it. If either the Mom or Dad had rolled the money into an IRA then the kid could have avoided, or at least delayed, a six figure tax bill since they could have the money in an inherited IRA.

You might want to review your beneficiary plans and consider rolling the money out to an IRA.

Topic Author
Mastied
Posts: 3
Joined: Mon May 27, 2019 7:56 am

Re: TSP

Post by Mastied » Wed Jun 12, 2019 4:25 pm

Thanks for that advice, I have read the same thing before, something to keep in mind.

Topic Author
Mastied
Posts: 3
Joined: Mon May 27, 2019 7:56 am

Re: TSP

Post by Mastied » Wed Jun 12, 2019 4:38 pm

I'm sorry for not providing better information on my previous post. To better help understand, back in October and for most of my time in TSP, I was heavily in C, S, and I, probably to much in equities. I took a loss in Oct 18, I move mostly to G for a while, moved back, and took another big loss. I should have been smarter (this was before I meet you'll). I now have C=48%, S=12%, and F=40%. I would like to wait at least 5 more years to start using any my TSP, how does this allocation sound?

some additional info
Emergency funds: I have 3-6 month expenses available outside of TSP
Debt: House- Balance $75k (9 years left), Car Loan- 13K (2.5 years left)
Tax Filing Status: Married Filing Jointly, 1 dependant
Tax Rate: 25% Federal, no State
State of Residence: TX
Age: 57
Desired Asset allocation: 60% stocks / 40% bonds
Desired International allocation: 0% of stocks
Last edited by Mastied on Wed Jun 12, 2019 4:48 pm, edited 1 time in total.

retiredjg
Posts: 36342
Joined: Thu Jan 10, 2008 12:56 pm

Re: TSP

Post by retiredjg » Wed Jun 12, 2019 4:40 pm

This is a reasonable allocation but you need an allocation you can stick with. Sometimes that is easier using a LifeCycle fund.

User avatar
ruralavalon
Posts: 15698
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: TSP

Post by ruralavalon » Thu Jun 13, 2019 2:24 pm

Mastied wrote:
Wed Jun 12, 2019 4:38 pm
I'm sorry for not providing better information on my previous post. To better help understand, back in October and for most of my time in TSP, I was heavily in C, S, and I, probably to much in equities. I took a loss in Oct 18, I move mostly to G for a while, moved back, and took another big loss. I should have been smarter (this was before I meet you'll). I now have C=48%, S=12%, and F=40%. I would like to wait at least 5 more years to start using any my TSP, how does this allocation sound?

some additional info
Emergency funds: I have 3-6 month expenses available outside of TSP
Debt: House- Balance $75k (9 years left), Car Loan- 13K (2.5 years left)
Tax Filing Status: Married Filing Jointly, 1 dependant
Tax Rate: 25% Federal, no State
State of Residence: TX
Age: 57
Desired Asset allocation: 60% stocks / 40% bonds
Desired International allocation: 0% of stocks
In my opinion your 60/40equity/fixed income allocation is very reasonable at age 57. Also your 80/20 mix of S&P 500/small-cap is reasonable.

I do usually suggest around 20-30% of stocks in international stocks.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Post Reply