Portfolio Review - Please Help

[Yohan24]

I am new to the Bogleheads forum but have found it very helpful. I am currently digging through previous posts. My investment experience is very limited.
Here is my profile:

Emergency funds: Yes, six months
Debt: No credit card, car loan, or mortgage (paid off). Only $4,200 school loan at 2.625%.
Tax Filing Status: Married Filing Jointly, three children (two in college and one starting next year)
Tax Rate: 22% Federal, 5.75% Georgia
State of Residence: Georgia
Age: 58, 52
Desired Asset Allocation: Looking for a balanced allocation appropriate for our age
Desired International Allocation: Looking for a balanced allocation appropriate for our age
Total Portfolio Size: Approximately $500k

Current Portfolio (including all investment and retirement accounts):

His 401(k) with employer-sponsored plan at Thrift Savings Plan (0.048% expense ratio): Total $372k
---His contribution: 10%
---Employer match: maxed
---Lifecycle (2040): 20%
---G Fund: 20%
---Bonds: 3%
---Stock C Fund: 22%
---Stock S Fund: 20%
---Stock I Fund: 15%

His 529 Plan (mainly for children’s college): $30k
His Pension Fund from previous employer: $17k
His Investment Stocks (various) at Charles Schwab: $20k
His IRA at Charles Schwab: $5k
His and Her House: $350k (paid off)

Questions:

1/ I am looking for advice on how to balance the 401(k) investment, appropriate for our age. How do I apply the lazy portfolio?
2/ I am interested in expanding the investment I have at Charles Schwab in stocks or any other investments. Should I put more money into the IRA or the 401(k)? For other stock investments, what are the recommended stocks or ETFs I should consider? Should I use a robo-adviser?
3/ On a related topic, I am thinking of refinancing my home, taking some cash out, and investing in stocks or real estate. Is this advisable?

[invest4]

Welcome!

Emergency Funds: good.


Debt: very good.


Desired Asset Allocation: It would help to know what your current AA is and why you chose it. Age can be a factor, but more importantly, that you choose an asset allocation that aligns with your risk tolerance.


Pension: 17K...does it also have a COLA? Any other interesting bits about the pension like survivor benefits, etc.?


Annual Expenses:

* What are your expenses now?


* What do you expect it to be when you are no longer working?


* Do you have a age /date in mind when you both will no longer be working?


Annual Income when no longer working: How much income do you want / need when you are no longer working? Best guesstimate is ok.


International: Some people don't think International is needed for a portfolio. How did you decide you want any? The current guidance is no less than 20% and no more than 40% of your stocks in Intl.


Current Portfolio:

* I am not familiar with the funds you provided. I suspect they are govt. related. Some of the others will chime in

* Also, "various stocks" doesn't really tell us anything. Are you choosing individual stocks or ?


529:

* What kind of college education are you attempting to fund? For example, an education at a state school is very different than a private one. Similarly, living on campus is much more expensive than living at home

* Assume you are not including the 529 in your portfolio.


Your Questions


1. You want a simple, diversified portfolio which matches your risk tolerance and can endure for the long term. You need very few investments to accomplish this.

For example:

* Total US Stock Market (VTI)

* Total Intl Market (VXUS)

* Bonds / Fixed Income (BND)


I have found bonds more complex than stocks. If you are not familiar with what is out there, you can either chose some that is very common / generally supported or educate yourself on the various options. Importantly, you must know what you are investing in.

2. Please see our WIki

Traditional vs Roth

No one cares about your money more than you do. You don't need an advisor, robo or otherwise if you are wiling to get educated to do it yourself with help from the members of this forum.

3. I would advise against this.

* Investing in real-estate and being a landlord is not a passive investment and quite a few people don't really understand whether they are actually making money or not. I suggest a firm pass.

* I also would not take money out of my house. By having a paid home, you already now have extra money to invest from your paychecks as you no longer need to pay a mortgage.


Best wishes.

[HomeStretch]

Welcome to the forum!

I am new to the Bogleheads forum but have found it very helpful. I am currently digging through previous posts. My investment experience is very limited. …

The BH wiki is also a great resource. You can access it from the menu in the upper left corner. I have also linked a few wiki pages, below.

… Debt: No credit card, car loan, or mortgage (paid off). Only $4,200 school loan at 2.625%. …

Consider paying the loan off. The interest arbitrage is very low.

Desired Asset Allocation: Looking for a balanced allocation appropriate for our age
Desired International Allocation: Looking for a balanced allocation appropriate for our age

Asset allocation (AA) is personal. See this BH wiki page which may be helpful in determining yours:
https://www.bogleheads.org/wiki/Asset_allocation

Given your age and proximity to retirement, an AA in the range of 50/50 to 70/30 (equity/fixed income) is reasonable imo. An international allocation of 20%-40% of your equity % is often recommended.

… Total Portfolio Size: Approximately $500k …

I see all portfolio accounts listed as “His”. Does your spouse have any retirement or other accounts?

Consider opening and contributing (even a small amount) in 2024 to initial Roth IRAs for you and spouse to start the 5-year clock. Prioritize making retirement contributions to the Roth IRAs over the Taxable account as the Roth accounts will grow tax free.

… His Pension Fund from previous employer: $17k …

Will you receive a monthly pension payment or will you be rolling this over to your IRA?

Q1/ I am looking for advice on how to balance the 401(k) investment, appropriate for our age. How do I apply the lazy portfolio? …

I am not familiar with the “lazy portfolio”. Have you considered a 3-fund portfolio with tax-efficient fund placement (see wiki pages linked, below)?
https://www.bogleheads.org/wiki/Three-fund_portfolio
https://www.bogleheads.org/wiki/Tax-eff ... _placement

2/ I am interested in expanding the investment I have at Charles Schwab in stocks or any other investments. Should I put more money into the IRA or the 401(k)? For other stock investments, what are the recommended stocks or ETFs I should consider? Should I use a robo-adviser?

Your portfolio is uncomplicated enough that, if you are willing, you can DIY invest in an easy-to-manage manner. Consider investing in a low-ER diversified total market equity fund in your Taxable account rather than individual stocks. Schwab has a U.S. total stock market fund, SWTSX.

3/ On a related topic, I am thinking of refinancing my home, taking some cash out, and investing in stocks or real estate. Is this advisable?

I would not recommend this.

[lakpr]

His 401(k) with employer-sponsored plan at Thrift Savings Plan (0.048% expense ratio): Total $372k
---His contribution: 10%
---Employer match: maxed
---Lifecycle (2040): 20%
---G Fund: 20%
---Bonds: 3%
---Stock C Fund: 22%
---Stock S Fund: 20%
---Stock I Fund: 15%

This allocation strikes me as very odd. The C fund is equivalent to S&P 500 index, and the S fund is equivalent to the SmallCap index. According to the Boglehead wiki, a total market representation consists of 85% S&P 500 Index and 15% small cap index. By those proportions, these should be approximately 30% C fund and 7% S fund.

The I fund is equivalent ot the Total International Stocks Index fund, and 20% represents approximately a third of the total stock allocation. Is that something you are comfortable with?

I also question the investment in both Lifecycle fund as well as the components of the 3-fund portfolio. Choose either one, not both. It's just confusing and not really serving a purpose. If it were me, for someone close to 60 years old, I suggest a 60:40 split. The 40% will go entirely into the G-fund, which has the superb advantage that it pays the same yield as the F fund (total bond index), but NEVER goes down in value (like F fund/total bond index did, in 2022, for -17%).

I would split the remainder as 40% C fund, 8% S fund, 12% I fund.

Lastly, I would also suggest increasing the TSP contributions to max out at $30k (for someone over 50) for 2024 and beyond.

[BitTooAggressive]

I am new to the Bogleheads forum but have found it very helpful. I am currently digging through previous posts. My investment experience is very limited.
Here is my profile:

Emergency funds: Yes, six months
Debt: No credit card, car loan, or mortgage (paid off). Only $4,200 school loan at 2.625%.
Tax Filing Status: Married Filing Jointly, three children (two in college and one starting next year)
Tax Rate: 22% Federal, 5.75% Georgia
State of Residence: Georgia
Age: 58, 52
Desired Asset Allocation: Looking for a balanced allocation appropriate for our age
Desired International Allocation: Looking for a balanced allocation appropriate for our age
Total Portfolio Size: Approximately $500k

Current Portfolio (including all investment and retirement accounts):

His 401(k) with employer-sponsored plan at Thrift Savings Plan (0.048% expense ratio): Total $372k
---His contribution: 10%
---Employer match: maxed
---Lifecycle (2040): 20%
---G Fund: 20%
---Bonds: 3%
---Stock C Fund: 22%
---Stock S Fund: 20%
---Stock I Fund: 15%

His 529 Plan (mainly for children’s college): $30k
His Pension Fund from previous employer: $17k
His Investment Stocks (various) at Charles Schwab: $20k
His IRA at Charles Schwab: $5k
His and Her House: $350k (paid off)

Questions:

1/ I am looking for advice on how to balance the 401(k) investment, appropriate for our age. How do I apply the lazy portfolio?
2/ I am interested in expanding the investment I have at Charles Schwab in stocks or any other investments. Should I put more money into the IRA or the 401(k)? For other stock investments, what are the recommended stocks or ETFs I should consider? Should I use a robo-adviser?
3/ On a related topic, I am thinking of refinancing my home, taking some cash out, and investing in stocks or real estate. Is this advisable?

Use the moderate Vanguard Life Strategy fund. 60/40 fund does the rebalancing for you and fairly inexpensive. When you learn more you may want something different you may not.

[Yohan24]

Thanks so much for taking the time to review my portfolio and providing feedback. I really appreciate it. My responses are below:

Welcome!

Emergency Funds: good.


Debt: very good.


Desired Asset Allocation: It would help to know what your current AA is and why you chose it. Age can be a factor, but more importantly, that you choose an asset allocation that aligns with your risk tolerance.

Looking my profile, my current AA is 77/23 but I think 70/30 may be better.


Pension: 17K...does it also have a COLA? Any other interesting bits about the pension like survivor benefits, etc.?

Not sure what it is. I assume it is a monthly payment after retirement. I will call fidelity and find out. It is a small amount anyways.

Annual Expenses:

* What are your expenses now?
5k per month

* What do you expect it to be when you are no longer working?

approx. 4k per month but need to work out the detail more.

* Do you have a age /date in mind when you both will no longer be working?

We are planning to work until 65 yrs old.

Annual Income when no longer working: How much income do you want / need when you are no longer working? Best guesstimate is ok.

60k

International: Some people don't think International is needed for a portfolio. How did you decide you want any? The current guidance is no less than 20% and no more than 40% of your stocks in Intl.

Currently, I have 15% now. but I would be ok with 30%.

Current Portfolio:

* I am not familiar with the funds you provided. I suspect they are govt. related. Some of the others will chime in

* Also, "various stocks" doesn't really tell us anything. Are you choosing individual stocks or ?

Yes, the funds are by government managed by Thrift Savings Plan.
The stocks I have at Schwab are individual stocks I bought during Covid and not performing well. Waiting for the right time to sell.

529:

* What kind of college education are you attempting to fund? For example, an education at a state school is very different than a private one. Similarly, living on campus is much more expensive than living at home

* Assume you are not including the 529 in your portfolio.

The 529 plan I am using the Georgia Path2College 529 plan. Two of them not living at home. They get full tuition scholarship. We are helping them with food and boarding expenses. Currently, spending about 1500 per month.

Your Questions


1. You want a simple, diversified portfolio which matches your risk tolerance and can endure for the long term. You need very few investments to accomplish this.

For example:

* Total US Stock Market (VTI)

* Total Intl Market (VXUS)

* Bonds / Fixed Income (BND)


I have found bonds more complex than stocks. If you are not familiar with what is out there, you can either chose some that is very common / generally supported or educate yourself on the various options. Importantly, you must know what you are investing in.

Thanks for the recommendation. I will educate myself and make a decision.

2. Please see our WIki

Traditional vs Roth

No one cares about your money more than you do. You don't need an advisor, robo or otherwise if you are wiling to get educated to do it yourself with help from the members of this forum.

Will do. Thanks so much.

3. I would advise against this.

* Investing in real-estate and being a landlord is not a passive investment and quite a few people don't really understand whether they are actually making money or not. I suggest a firm pass.

* I also would not take money out of my house. By having a paid home, you already now have extra money to invest from your paychecks as you no longer need to pay a mortgage.

Well noted. Thanks for your advice. Few friends wanted to get together and form LLC and invest in commercial real estate business. For this, we were thinking contributing 100k each and I was thinking taking out that money from the home equity.

Best wishes.

[Yohan24]

Thanks so much for taking the time to review my portfolio and providing feedback. Also, thanks for sharing the valuable Wiki links. I really appreciate it. My responses are below:

Welcome to the forum!

I am new to the Bogleheads forum but have found it very helpful. I am currently digging through previous posts. My investment experience is very limited. …

The BH wiki is also a great resource. You can access it from the menu in the upper left corner. I have also linked a few wiki pages, below.

Will do. Thanks.

… Debt: No credit card, car loan, or mortgage (paid off). Only $4,200 school loan at 2.625%. …

Consider paying the loan off. The interest arbitrage is very low.

I could pay it but since the interest is very low, I kept it.

Desired Asset Allocation: Looking for a balanced allocation appropriate for our age
Desired International Allocation: Looking for a balanced allocation appropriate for our age

Asset allocation (AA) is personal. See this BH wiki page which may be helpful in determining yours:
https://www.bogleheads.org/wiki/Asset_allocation

Given your age and proximity to retirement, an AA in the range of 50/50 to 70/30 (equity/fixed income) is reasonable imo. An international allocation of 20%-40% of your equity % is often recommended.

Thanks for the info. I am thinking 70/30 AA and international allocation of 30%. I have 15% now.

… Total Portfolio Size: Approximately $500k …

I see all portfolio accounts listed as “His”. Does your spouse have any retirement or other accounts?


Consider opening and contributing (even a small amount) in 2024 to initial Roth IRAs for you and spouse to start the 5-year clock. Prioritize making retirement contributions to the Roth IRAs over the Taxable account as the Roth accounts will grow tax free.

No, she doesn't. Will do Roth IRAs for her.

… His Pension Fund from previous employer: $17k …

Will you receive a monthly pension payment or will you be rolling this over to your IRA?

Need to check with them but I believe it will be a monthly pension payment.

Q1/ I am looking for advice on how to balance the 401(k) investment, appropriate for our age. How do I apply the lazy portfolio? …

I am not familiar with the “lazy portfolio”. Have you considered a 3-fund portfolio with tax-efficient fund placement (see wiki pages linked, below)?
https://www.bogleheads.org/wiki/Three-fund_portfolio
https://www.bogleheads.org/wiki/Tax-eff ... _placement

Somewhere in the Wikis I saw the 3-fund portfolio considered as "Lazy Portfolio". That is what I meant.

2/ I am interested in expanding the investment I have at Charles Schwab in stocks or any other investments. Should I put more money into the IRA or the 401(k)? For other stock investments, what are the recommended stocks or ETFs I should consider? Should I use a robo-adviser?

Your portfolio is uncomplicated enough that, if you are willing, you can DIY invest in an easy-to-manage manner. Consider investing in a low-ER diversified total market equity fund in your Taxable account rather than individual stocks. Schwab has a U.S. total stock market fund, SWTSX.

Well noted. Thanks.

3/ On a related topic, I am thinking of refinancing my home, taking some cash out, and investing in stocks or real estate. Is this advisable?

I would not recommend this.
Well noted, Thanks.

[Yohan24]

Thanks so much for taking the time to review my portfolio and providing feedback. Thanks for pointing out the difference b/n the C and S fund. I will take your suggestion, reallocate, and try to add more contribution to the TSP fund.

His 401(k) with employer-sponsored plan at Thrift Savings Plan (0.048% expense ratio): Total $372k
---His contribution: 10%
---Employer match: maxed
---Lifecycle (2040): 20%
---G Fund: 20%
---Bonds: 3%
---Stock C Fund: 22%
---Stock S Fund: 20%
---Stock I Fund: 15%

This allocation strikes me as very odd. The C fund is equivalent to S&P 500 index, and the S fund is equivalent to the SmallCap index. According to the Boglehead wiki, a total market representation consists of 85% S&P 500 Index and 15% small cap index. By those proportions, these should be approximately 30% C fund and 7% S fund.

The I fund is equivalent ot the Total International Stocks Index fund, and 20% represents approximately a third of the total stock allocation. Is that something you are comfortable with?

I also question the investment in both Lifecycle fund as well as the components of the 3-fund portfolio. Choose either one, not both. It's just confusing and not really serving a purpose. If it were me, for someone close to 60 years old, I suggest a 60:40 split. The 40% will go entirely into the G-fund, which has the superb advantage that it pays the same yield as the F fund (total bond index), but NEVER goes down in value (like F fund/total bond index did, in 2022, for -17%).

I would split the remainder as 40% C fund, 8% S fund, 12% I fund.

Lastly, I would also suggest increasing the TSP contributions to max out at $30k (for someone over 50) for 2024 and beyond.

[Yohan24]

I made the following adjustments:

Stock (60%)
-C Fund 40%
-S Fund 8%
-I Fund 12%

The objective of the C Fund is to match the performance of the Standard & Poor’s 500 Stock Index (S&P 500).
The objective of the S Fund is to match the performance of the Dow Jones U.S. Completion Total Stock Market (TSM) Index.
The objective of the I Fund is to match the performance of the MSCI EAFE (Europe, Australasia, Far East) Index.

Bond (40%)
-G Fund (15%)
-F Fund (25%)

The investment objective of the G Fund is to ensure preservation of capital and generate returns above those of short-term U.S. Treasury
securities.
The objective of the F Fund is to match the performance of the Bloomberg U.S. Aggregate Bond Index, a broad index representing the U.S. investment-grade bond market.

Thanks so much for taking the time to review my portfolio and providing feedback. Thanks for pointing out the difference b/n the C and S fund. I will take your suggestion, reallocate, and try to add more contribution to the TSP fund.

His 401(k) with employer-sponsored plan at Thrift Savings Plan (0.048% expense ratio): Total $372k
---His contribution: 10%
---Employer match: maxed
---Lifecycle (2040): 20%
---G Fund: 20%
---Bonds: 3%
---Stock C Fund: 22%
---Stock S Fund: 20%
---Stock I Fund: 15%

This allocation strikes me as very odd. The C fund is equivalent to S&P 500 index, and the S fund is equivalent to the SmallCap index. According to the Boglehead wiki, a total market representation consists of 85% S&P 500 Index and 15% small cap index. By those proportions, these should be approximately 30% C fund and 7% S fund.

The I fund is equivalent ot the Total International Stocks Index fund, and 20% represents approximately a third of the total stock allocation. Is that something you are comfortable with?

I also question the investment in both Lifecycle fund as well as the components of the 3-fund portfolio. Choose either one, not both. It's just confusing and not really serving a purpose. If it were me, for someone close to 60 years old, I suggest a 60:40 split. The 40% will go entirely into the G-fund, which has the superb advantage that it pays the same yield as the F fund (total bond index), but NEVER goes down in value (like F fund/total bond index did, in 2022, for -17%).

I would split the remainder as 40% C fund, 8% S fund, 12% I fund.

Lastly, I would also suggest increasing the TSP contributions to max out at $30k (for someone over 50) for 2024 and beyond.

[lakpr]

I made the following adjustments:

Stock (60%)
-C Fund 40%
-S Fund 8%
-I Fund 12%

The objective of the C Fund is to match the performance of the Standard & Poor’s 500 Stock Index (S&P 500).
The objective of the S Fund is to match the performance of the Dow Jones U.S. Completion Total Stock Market (TSM) Index.
The objective of the I Fund is to match the performance of the MSCI EAFE (Europe, Australasia, Far East) Index.

Bond (40%)
-G Fund (15%)
-F Fund (25%)

The investment objective of the G Fund is to ensure preservation of capital and generate returns above those of short-term U.S. Treasury
securities.
The objective of the F Fund is to match the performance of the Bloomberg U.S. Aggregate Bond Index, a broad index representing the U.S. investment-grade bond market.

Thanks so much for taking the time to review my portfolio and providing feedback. Thanks for pointing out the difference b/n the C and S fund. I will take your suggestion, reallocate, and try to add more contribution to the TSP fund.

It looks so much better, but I would still put everything in the G fund. As I said already, when interest rates rise, the F fund will fall in value. In 2022, it fell by 17%. G fund, on the other hand, will NEVER decrease in value. Yet it also gives you the same yield as F fund.

I am envious of Fed folks who have access to this G fund, us plebes in the private world have no access to a fund like this that will provide same yield as intermediate term bond fund yet has a guarantee of never losing value. We will have to settle for low returns if we want to preserve capital, or wager the money at the table if we want to capture higher yields.

Edited to add: as another frequent poster on this forum, @grabiner, says -- the G fund is the closest thing to a free lunch in the investment world. I really urge you to take full advantage of it.

[Yohan24]

I made the following adjustments:

Stock (60%)
-C Fund 40%
-S Fund 8%
-I Fund 12%

The objective of the C Fund is to match the performance of the Standard & Poor’s 500 Stock Index (S&P 500).
The objective of the S Fund is to match the performance of the Dow Jones U.S. Completion Total Stock Market (TSM) Index.
The objective of the I Fund is to match the performance of the MSCI EAFE (Europe, Australasia, Far East) Index.

Bond (40%)
-G Fund (15%)
-F Fund (25%)

The investment objective of the G Fund is to ensure preservation of capital and generate returns above those of short-term U.S. Treasury
securities.
The objective of the F Fund is to match the performance of the Bloomberg U.S. Aggregate Bond Index, a broad index representing the U.S. investment-grade bond market.

Thanks so much for taking the time to review my portfolio and providing feedback. Thanks for pointing out the difference b/n the C and S fund. I will take your suggestion, reallocate, and try to add more contribution to the TSP fund.

It looks so much better, but I would still put everything in the G fund. As I said already, when interest rates rise, the F fund will fall in value. In 2022, it fell by 17%. G fund, on the other hand, will NEVER decrease in value. Yet it also gives you the same yield as F fund.

Point well taken. Will make an adjustment. Once again, thanks for your quick response.

I am envious of Fed folks who have access to this G fund, us plebes in the private world have no access to a fund like this that will provide same yield as intermediate term bond fund yet has a guarantee of never losing value. We will have to settle for low returns if we want to preserve capital, or wager the money at the table if we want to capture higher yields.

Edited to add: as another frequent poster on this forum, @grabiner, says -- the G fund is the closest thing to a free lunch in the investment world. I really urge you to take full advantage of it.

[HistoryMD]

I am also a federal worker. I take the point about the G fund being very good overall, but over the long haul the F fund has performed better, and even with the big drop in 2022, there's not a huge difference over the past 10 years (1.8% for the F fund and 2.46% for the G fund). I'm personally putting more in the F fund right now because, with interest rates likely to continue falling, it'll probably outperform the G fund (whose annual return is likely to drop as interest rates drop). There's no guarantee with that, but it seems like a safe bet. After interest rates have fallen a bit, it might make sense at that point to shift back into the G fund.

All that is to say that I think Yohan's idea to put 15% in the G fund and 25% in the F fund is reasonable. Or, if you want to hedge a bit, it could be 20% in each.

[lakpr]

I am also a federal worker. I take the point about the G fund being very good overall, but over the long haul the F fund has performed better, and even with the big drop in 2022, there's not a huge difference over the past 10 years (1.8% for the F fund and 2.46% for the G fund). I'm personally putting more in the F fund right now because, with interest rates likely to continue falling, it'll probably outperform the G fund (whose annual return is likely to drop as interest rates drop). There's no guarantee with that, but it seems like a safe bet. After interest rates have fallen a bit, it might make sense at that point to shift back into the G fund.

All that is to say that I think Yohan's idea to put 15% in the G fund and 25% in the F fund is reasonable. Or, if you want to hedge a bit, it could be 20% in each.

I do believe that you may be mistaken. I am not a Federal worker, but according to the Wiki entry here: https://www.bogleheads.org/wiki/G_Fund, the G fund provides the exact same yield as an intermediate term fund (which is what the total bond fund is).

You are also mistaken that the NAV of the total bond fund / F fund will rise as the short term interest rates fall. That fall in rates is already baked into the NAV of the fund; what is it that you know that the rest of the market does not know? Since the rate cut has been announced, there is hardly any movement in the NAV of the bond fund VBTLX (I can't check the F fund, so using the proxy). https://finance.yahoo.com/quote/VBTLX/
Fed rate cut had been announced on September 18th, but since then till today, the NAV stayed flat (9.91 on Sept 18, 9.90 today).

A third mistake is to assume that the 0.66% in extra yield in G fund is inconsequential over the past 10 years. Would you willingly buy a fund that has an expense ratio of 0.66%? In essence you are arguing that the higher-ER fund is better.

[HistoryMD]

The G fund and the F fund are different--both bond funds in a way, but I don't think it's as simple as saying that the G fund gives the same yield as the F fund without ever falling in value. Until 2022, the F fund had outperformed the G fund since their inception in the late 1980s (and even with the losses in 2022 the F fund's annual return is still 0.7% ahead of the G Fund since inception). You can compare the two funds here: https://www.tsp.gov/funds-individual/.

Regardless, they are both good funds. The F offers the potential for more upside, but with the greater possibility of losses, especially in the short- or medium-term. The G fund can be anemic at times (i.e. when interest rates are low), but it's definitely a big plus that it never drops in value. If security is what you want, the G fund is pretty great.

When I say that I assume the F fund will continue to rise, it's because I'm assuming the Fed will continue to cut rates for the next year or so. I could be wrong in thinking that, but time will tell. Do you think that bond funds already know how far rates will eventually fall and have already priced the total fall in? Or are you only saying that they've already priced in the cut a few weeks ago?

[lakpr]

I do think the bond funds anticipate and price the rate cuts almost months in advance. I think the September rate cut was anticipated back in May, that's when the rally started.

If the size of the rate cut does not match the anticipation, the bond funds have the nasty effect of dropping in value instead. Witness the rally between October 2023 till December 2023, then drop until April 2024. Bond funds expected a rate cut at the Fed meeting in December 2023, were disappointed, before the anticipation picked up again in May 2024.

Thanks for that link for comparing TSP funds. I do not place any credence in the "lifetime" returns of the F fund over G fund, for two reasons: 1) if you have an investment horizon greater than 10 years, it would be stupid to stick that money in either G fund or F fund, 2) as bond pundits did declare, we had a 30 year bull market for bond funds that has come to a definite halt in 2022 and I/we were dolts to expect to continue indefinitely; it is also unlikely, with the burgeoning deficits.

[ruralavalon]

I made the following adjustments:

Stock (60%)
-C Fund 40%
-S Fund 8%
-I Fund 12%

The objective of the C Fund is to match the performance of the Standard & Poor’s 500 Stock Index (S&P 500).
The objective of the S Fund is to match the performance of the Dow Jones U.S. Completion Total Stock Market (TSM) Index.
The objective of the I Fund is to match the performance of the MSCI EAFE (Europe, Australasia, Far East) Index.

Bond (40%)
-G Fund (15%)
-F Fund (25%)

In my opinion the changes which you have made are reasonable.


In my opinion a combination of the F Fund and the G Fund is reasonable for the fixed income allocation.

Wiki article, Thrift Savings Plan

The G Fund offers the opportunity to earn rates of interest comparable to those of intermediate-term Government securities but without any risk of loss of principal and very little volatility of earnings. The G Fund is invested in short-term U.S. Treasury securities specially issued to the TSP. Payment of principal and interest is guaranteed by the U.S. Government. Thus, there is no "credit risk". The interest rate resets monthly and is based on the weighted average yield of all outstanding Treasury notes and bonds with 4 or more years to maturity. Earnings consist entirely of interest income on the securities. Interest on G Fund securities has, over time, outpaced inflation and 90-day T-bills.

[Yohan24]

On Roth vs Traditional IRA contribution, being close to age 60, I thought it would be better to contribute more on Traditional now, to take advantage of tax (high income now compared to when I retire).
What are your thoughts on this?

[lakpr]

On Roth vs Traditional IRA contribution, being close to age 60, I thought it would be better to contribute more on Traditional now, to take advantage of tax (high income now compared to when I retire).
What are your thoughts on this?

You are talking about IRA, right? Not Roth contributions to the workplace 401(k)?

If you are contributing to a workplace retirement plan, your ability to deduct contributions to IRA is limited. The right answer is to max out your Traditional 401(k), and make Roth IRA contributions annually (as your Traditional IRA contributions won't be deductible anyway, better to spring for Roth IRA to protect future growth from taxes).

https://www.irs.gov/retirement-plans/ar ... ement-plan

[Yohan24]

On Roth vs Traditional IRA contribution, being close to age 60, I thought it would be better to contribute more on Traditional now, to take advantage of tax (high income now compared to when I retire).
What are your thoughts on this?

You are talking about IRA, right? Not Roth contributions to the workplace 401(k)?

If you are contributing to a workplace retirement plan, your ability to deduct contributions to IRA is limited. The right answer is to max out your Traditional 401(k), and make Roth IRA contributions annually (as your Traditional IRA contributions won't be deductible anyway, better to spring for Roth IRA to protect future growth from taxes).

https://www.irs.gov/retirement-plans/ar ... ement-plan

Got it. Sorry, I meant 401 (K) vs IRA.

[lakpr]

On Roth vs Traditional IRA contribution, being close to age 60, I thought it would be better to contribute more on Traditional now, to take advantage of tax (high income now compared to when I retire).
What are your thoughts on this?

You are talking about IRA, right? Not Roth contributions to the workplace 401(k)?

If you are contributing to a workplace retirement plan, your ability to deduct contributions to IRA is limited. The right answer is to max out your Traditional 401(k), and make Roth IRA contributions annually (as your Traditional IRA contributions won't be deductible anyway, better to spring for Roth IRA to protect future growth from taxes).

https://www.irs.gov/retirement-plans/ar ... ement-plan

Got it. Sorry, I meant 401 (K) vs IRA.

Unless you have more than $2 million in the 401(k) today, it does not make sense to make Roth contributions to your 401(k). Your first post indicates that your total portfolio is about $500k, so Traditional still is the right answer.

The 22% tax bracket today begins at around $90k taxable income for a couple married filing jointly, along with a $29k standard deduction; which means $119k income. You will land in the 22% tax bracket in retirement only if your income exceeds this. Say $120k for the closest amount and dealing with in round numbers.

If $120k were to be 4% of the portfolio (which is the "safe" withdrawal rate from a portfolio that is expected to last 30 years of retirement), your portfolio must be $3 million, around the time that you retire.

I don't foresee $500k (what you said you have today, in the first post) becoming $3 million in approximately a decade (assuming that's when you will retire). If you have $2 million today already, then it is possible that it will grow to $3 million in 10 years. That's why I said unless you already have $2 million today, you should defer taxes today at 22% Federal, and pay 12% when you retire and withdraw from the portfolio. [ May be 15% then since the 12% bracket would be no more and becomes 15% at the end of 2025; but still that's a 7% tax rate advantage; state taxes would be neutral, same either now or in retirement ]

[Yohan24]

On Roth vs Traditional IRA contribution, being close to age 60, I thought it would be better to contribute more on Traditional now, to take advantage of tax (high income now compared to when I retire).
What are your thoughts on this?

You are talking about IRA, right? Not Roth contributions to the workplace 401(k)?

If you are contributing to a workplace retirement plan, your ability to deduct contributions to IRA is limited. The right answer is to max out your Traditional 401(k), and make Roth IRA contributions annually (as your Traditional IRA contributions won't be deductible anyway, better to spring for Roth IRA to protect future growth from taxes).

https://www.irs.gov/retirement-plans/ar ... ement-plan

Got it. Sorry, I meant 401 (K) vs IRA.

Unless you have more than $2 million in the 401(k) today, it does not make sense to make Roth contributions to your 401(k). Your first post indicates that your total portfolio is about $500k, so Traditional still is the right answer.

The 22% tax bracket today begins at around $90k taxable income for a couple married filing jointly, along with a $29k standard deduction; which means $119k income. You will land in the 22% tax bracket in retirement only if your income exceeds this. Say $120k for the closest amount and dealing with in round numbers.

If $120k were to be 4% of the portfolio (which is the "safe" withdrawal rate from a portfolio that is expected to last 30 years of retirement), your portfolio must be $3 million, around the time that you retire.

I don't foresee $500k (what you said you have today, in the first post) becoming $3 million in approximately a decade (assuming that's when you will retire). If you have $2 million today already, then it is possible that it will grow to $3 million in 10 years. That's why I said unless you already have $2 million today, you should defer taxes today at 22% Federal, and pay 12% when you retire and withdraw from the portfolio. [ May be 15% then since the 12% bracket would be no more and becomes 15% at the end of 2025; but still that's a 7% tax rate advantage; state taxes would be neutral, same either now or in retirement ]

Once again, thanks so much for your guidance!!!
I have doubled my contribution to 401(K). Will not be able to max out now but will see what I can do in the future.

[lakpr]

Once again, thanks so much for your guidance!!!
I have doubled my contribution to 401(K). Will not be able to max out now but will see what I can do in the future.

You are most welcome, and wishing you the best of luck for your future and a pleasant retirement!

[ruralavalon]

Once again, thanks so much for your guidance!!!
I have doubled my contribution to 401(K). Will not be able to max out now but will see what I can do in the future.

That's an excellent decision

Traditional rather than Roth 401k contributions are probably better.

[HomeStretch]

^^^ This

The BH wiki page “traditional v Roth” may be helpful:
https://www.bogleheads.org/wiki/Traditional_versus_Roth