Author Topic: Is it worth maxing out the G Fund?  (Read 1750 times)

orange_turtle

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Is it worth maxing out the G Fund?
« on: January 15, 2015, 02:25:11 PM »
Hello all,

I've been reading and absorbing for a while and this is my first post.  Thanks for reading.

My husband and I (ages 36 and 37) are both federal employees making about $138,000 annually, each.  I max out my TSP and the entire balance is in the L-2040 fund.  My husband, who was in a tougher financial situation than I was before we got married 1.5 years ago, contributes 5% (enough to get the full match) and insists that his balance go entirely into the G fund, which as I understand it is government bonds that provide security but very little return (not even sure if it beats the rate of inflation?)

I do most of our financial planning (which he is fine with).  I am wondering whether to have him max out his TSP contributions given that it will all go into the G fund, or pay taxes on that money now and then invest it elsewhere.  The difference between 5% and maxing out is roughly $900/month. 

I'd appreciate your thoughts!  Thank you!

CheapskateWife

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Re: Is it worth maxing out the G Fund?
« Reply #1 on: January 15, 2015, 02:36:53 PM »
Any chance of him being willing to change his strategy?  The thing is that you are both going to qualify for a pension (maybe just a small one if you only work 10yrs and then defer federal retirement)  So that money is guaranteed and predictable.  There is no reason why you should be playing so safe with his TSP. 

IF you show him your relative success and improved growth over his strategy, does that matter?

If not, you as a couple can diversify into higher risk investments using other accounts given his insistence on staying with the relative security of the G fund.

Mine got so overwhelmed with the options that I just asked him to give me his password and now I manage his too. 

Edited because I didn't answer your question....yes, max him out anyway and reduce your tax burden, then play fast and loose with the investments in your TSP portfolio because he has the no-risk stuff locked in.

dandarc

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Re: Is it worth maxing out the G Fund?
« Reply #2 on: January 15, 2015, 02:41:31 PM »
The tax savings today on your income would probably have me putting as much into TSP as possible.  Granted, tax savings + higher growth is better, but at 275K income, you're in a pretty darn high tax bracket today. 

Ideal solution - get him to max it, and convince him to try the other funds.  Even going to 20/80 would be a step in the right direction.

orange_turtle

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Re: Is it worth maxing out the G Fund?
« Reply #3 on: January 15, 2015, 02:50:24 PM »
Thanks, @CheapskateWife and @dandarc.  I haven't really tried to convince him to change his strategy, because he comes from a poor background and hates to risk losing money, and I feel like his opinion should count for something since I make most of the money decisions.

That's a great idea to max him out and then adjust my own portfolio.  Thanks.  I appreciate it!  I have been feeling bad about letting those tax savings slip away.  Also, good point about the pension.  He has no interest in early retirement, but I can see being done with work after another ten years or so.

DollarBill

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Re: Is it worth maxing out the G Fund?
« Reply #4 on: January 15, 2015, 04:14:31 PM »
I would spread it out to 34% C, 33% S and 33% I. Especially is your going to continue to contribute to the TSP. The reason I don't go with an L fund is because you won't gain that much in the G and F funds.