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Learning, Sharing, and Teaching => Investor Alley => Topic started by: DeniseNJ on March 27, 2019, 08:01:09 AM

Title: TSP allocations?
Post by: DeniseNJ on March 27, 2019, 08:01:09 AM
TSP is the federal employee's 401K.  It has various options like SP500, small stock, international, bonds, etc. as below, and life cycle funds that get more conservative as your time to withdraw comes near.  I'm in the latest lifecycle fund which turns into a mix suited to income by 2050, but I find it's too conservative, like 18% of G and F as of right now growing more conservative for the next 30 years.  and the international fund is a big portion and it seems to suck.  Any federal employees want to give an opinion?  How is your TSP distributed?  I plan to retire in 9 years but I don't really plan to tap the TSP anytime soon after.

L2050
G Fund: Government Securities Investment Fund--11
F Fund: Fixed Income Index Investment Fund--7
C Fund: Common Stock Index Investment Fund--40
S Fund: Small Cap Stock Index Investment Fund--13
I Fund: International Stock Index Investment Fund--29
Title: Re: TSP allocations?
Post by: MustacheAndaHalf on March 27, 2019, 08:30:06 AM
So your retirement date is 2030, but you're using a 2050 allocation because you don't plan to touch the TSP for 30 years?  For money 30 years from being used, you could allocate 10% bonds (5% each G and F).  Peek at the holdings any target date fund to see for yourself: search for "Vanguard 2050", for example.

All of the government funds have impressively low expense ratios - the international fund even moreso, if I recall correctly.  If you have investments outside your TSP, the biggest expense ratio advantage of your TSP is the international fund.  The smallest advantage is in the S&P 500 stocks (C fund).
Title: Re: TSP allocations?
Post by: DeniseNJ on March 27, 2019, 09:07:45 AM
Quote
So your retirement date is 2030, but you're using a 2050 allocation because you don't plan to touch the TSP for 30 years?
I'm using the 2050 bc the 2030 has like 40% in the G and F fund.  I see the dates as just indicating when the fund turns into its most conservative form.  But it seems like they're all too conservative.  I wouldn't put 40% of money that I needed in 10 years into bonds.  So I'm thinking maybe make my own allocation from amoung the different index funds instead of using the Lifecycle ones.  I would not be playing with it, just rebalancing as necessary and making choices as I get older.

Also, it is most of our savings but we have pensions coming so it wouldn't be much of our income.  Curious what combo others are using.
Title: Re: TSP allocations?
Post by: wenchsenior on March 27, 2019, 09:10:39 AM
DH is planning on retiring around normal retirement age (~65-67) ~10 years from now. We view his pension sort of like a cash/bond fund, so we have his TSP set quite aggressive/stock heavy (I think we have it in the 2050 life cycle fund, but I'd have to double check).
Title: Re: TSP allocations?
Post by: fattest_foot on March 27, 2019, 10:03:11 AM
80% C, 20% S, per Bogleheads:

Thrift Savings Plan - Bogleheads (http://www.bogleheads.org/wiki/Thrift_Savings_Plan)

Quote
Many TSP investors wish to use the C and S funds to replicate the Total Stock Market. You can hold the C Fund (tracks the S&P 500) and S Fund (tracks the Dow Jones U.S. Completion Total Stock Market (TSM) Index) in a 4 to 1 ratio to approximate the total stock market.
Title: Re: TSP allocations?
Post by: ZMonet on March 27, 2019, 10:12:52 AM
I'm 100% C.  Like Wenchsenior, I tend to think of my pension as a bond and therefore think it makes sense to be stock heavy.    I'm not sure how many years of service you intend to/have put in but it sounds like you'll have at least some pension since you say you plan on staying 7 years (pension vests in 5).
Title: Re: TSP allocations?
Post by: sol on March 27, 2019, 10:47:52 AM
Quote
So your retirement date is 2030, but you're using a 2050 allocation because you don't plan to touch the TSP for 30 years?
I'm using the 2050 bc the 2030 has like 40% in the G and F fund.  I see the dates as just indicating when the fund turns into its most conservative form.  But it seems like they're all too conservative.

I agree that they seem conservative for this crowd, but they're not really targeted at this crowd.  Remember that the 2030 is supposedly for people who are already 20 years into a 30 year career.  For someone who is only ten years from traditional retirement age, being 40% G/F is probably about right if you follow the standard retirement recommendations. 

As an added complication, virtually everyone who has access to the TSP also has a federal pension.  The traditional asset allocation advice that the TSP is based on was formulated for people who do NOT have pensions.  Pensions act very much like bonds, when you look at your whole retirement savings picture together, and depending on how aggressively you save in the TSP it's likely that you have a comparable amount of (NPV) value stored in your pension as you do in your TSP.  So for many federal employees, roughly half of their retirement plan is in something that is basically 100% bonds, and the other half is in some sort of L fund that is between 10 and 90% bonds depending on their age.  It's a very conservative mixture, when evaluated holistically.

I think rocking the 2050 is probably fine for most of us, unless you plan to spend that money sometime soon.
Title: Re: TSP allocations?
Post by: DeniseNJ on March 27, 2019, 10:55:18 AM
I'm 100% C.  Like Wenchsenior, I tend to think of my pension as a bond and therefore think it makes sense to be stock heavy.    I'm not sure how many years of service you intend to/have put in but it sounds like you'll have at least some pension since you say you plan on staying 7 years (pension vests in 5).

I will have 30 yrs--where does the time go?!  I will be 57 yrs old and 4 months and have a full pension.  I love my job but I'm leaving the first day I'm really able, since there are other things I love to do too. Since the pension is a sure thing, no reason to have my TSP so heavily in G and F and the International fund seems to do horribly, even over the years, but it's a huge component of the L2050, 28%, even more than S at only 13%.
 
Average Annual Returns (As of December 2018)
    I Fund*   EAFE Index
1-Year   -13.43%   -13.79%
3-Year   3.50%   2.87%
5-Year   0.88%   0.53%
10-Year   6.48%   6.32%
Since May 1, 2001   4.09%   3.96%
*After expenses
Title: Re: TSP allocations?
Post by: DeniseNJ on March 27, 2019, 11:02:40 AM
Quote
So your retirement date is 2030, but you're using a 2050 allocation because you don't plan to touch the TSP for 30 years?
I'm using the 2050 bc the 2030 has like 40% in the G and F fund.  I see the dates as just indicating when the fund turns into its most conservative form.  But it seems like they're all too conservative.

I agree that they seem conservative for this crowd, but they're not really targeted at this crowd.  Remember that the 2030 is supposedly for people who are already 20 years into a 30 year career.  For someone who is only ten years from traditional retirement age, being 40% G/F is probably about right if you follow the standard retirement recommendations. 

As an added complication, virtually everyone who has access to the TSP also has a federal pension.  The traditional asset allocation advice that the TSP is based on was formulated for people who do NOT have pensions.  Pensions act very much like bonds, when you look at your whole retirement savings picture together, and depending on how aggressively you save in the TSP it's likely that you have a comparable amount of (NPV) value stored in your pension as you do in your TSP.  So for many federal employees, roughly half of their retirement plan is in something that is basically 100% bonds, and the other half is in some sort of L fund that is between 10 and 90% bonds depending on their age.  It's a very conservative mixture, when evaluated holistically.

I think rocking the 2050 is probably fine for most of us, unless you plan to spend that money sometime soon.

There's also SS benefits.  If you retire before 62, you get an SS supplement until 62 when you can take your benefit.  when they switched to FERS from the way better CSRS, the idea was that your retirment would be based on your FERS pension, your TSP (that's why the 5% match) and SS (that's why the supplement).  (CSRS didn't get or pay into SS)  With these three buckets it's odd for the L funds to be so conservative--Although I hear they are going to do a 2060 and 2065.  But even at ten years away with a pension and SS supplement, they are super conservative--worse, nobody even maxes them out!
Title: Re: TSP allocations?
Post by: kendallf on March 27, 2019, 12:29:58 PM
80% C, 20% S, per Bogleheads:

Thrift Savings Plan - Bogleheads (http://www.bogleheads.org/wiki/Thrift_Savings_Plan)

Quote
Many TSP investors wish to use the C and S funds to replicate the Total Stock Market. You can hold the C Fund (tracks the S&P 500) and S Fund (tracks the Dow Jones U.S. Completion Total Stock Market (TSM) Index) in a 4 to 1 ratio to approximate the total stock market.

I'm 70/30, but yeah.. as others have noted, I treat my pension/supplemental/SS as the conservative "bond-like" portions of my portfolio, and my living expenses are low enough where I won't need to tap my TSP funds immediately.  I'm 52 years old, about 4 years from retirement. 
Title: Re: TSP allocations?
Post by: ThatGuy on March 27, 2019, 09:05:39 PM
My TSP allocation is 60% C 40% S.  I agree, the I fund seems to do horribly.  I thought you had to be 60.5 to get the SS supplement.
Title: Re: TSP allocations?
Post by: DeniseNJ on March 28, 2019, 05:28:45 AM
My TSP allocation is 60% C 40% S.  I agree, the I fund seems to do horribly.  I thought you had to be 60.5 to get the SS supplement.
Nope, you just have to retire at full retirement age and I think 30 years.  There's a government website called GRB that shows you exactly what you would get per today's data at various ages and times of service.  I forget what GRB stands for.  Check if your agency participates and they will give you a sign in code.  It even tells you how much your current annual leave is worth.

https://platform.grbinc.com/IdentityProviderStandard/UserAccount/Login?binding=urn:oasis:names:tc:SAML:2.0:bindings:HTTP-POST&Session=&License=

Title: Re: TSP allocations?
Post by: simonsez on March 28, 2019, 10:34:05 AM
I'm in the latest lifecycle fund which turns into a mix suited to income by 2050, but I find it's too conservative, like 18% of G and F as of right now growing more conservative for the next 30 years.  and the international fund is a big portion and it seems to suck.  Any federal employees want to give an opinion?  How is your TSP distributed?
Agree, I'm 75/25 C/S, which seems to be near several others.  I rebalance a couple times each year.

If you like no-hassle approach of the L funds, the L2060 is coming in 2020 and will start with 99% stock allocation FWIW.
Title: Re: TSP allocations?
Post by: insufFIcientfunds on March 28, 2019, 12:47:38 PM
The GRB Platform replaced EBIS as the data system that estimates the FERS retirement benefits, medical coverage, FEGLI, and some stuff with the TSP, and gives some great insight into a bunch of stuff through videos and instructions.

My TSP is 100% S right now. Lots of years left until I withdraw. My biggest complaint right now isn't the asset allocation options but the withdrawal options upon retirement. Maybe those will change between now and then, or maybe that goes into a persons investment philosophy. Either way...I love the TSP!
Title: Re: TSP allocations?
Post by: sol on March 28, 2019, 01:01:19 PM
My biggest complaint right now isn't the asset allocation options but the withdrawal options upon retirement. Maybe those will change between now and then

There are already significant changes to the TSP withdrawal options in the works, that should make it look more like a commercially available 401k plan.  Historically, the "only two lifetime withdrawal events" rule has been one of the primary reasons why people liquidated their TSP accounts, and they're trying to stem that tide.
Title: Re: TSP allocations?
Post by: Sugaree on March 28, 2019, 01:22:38 PM
I'm currently sitting at like 91% L2050 and 9% L2040 with contributions set at 90/10 L2050/L2040.  I plan to retire in 2039, so this is set to kind of slowly transition to the "correct" lifecycle fund.  I have some outside accounts too, so my overall AA is somewhere around 76% stocks and 24% bonds.  I know that's on the conservative side for around here.  I'm probably going to open an HSA next year when I switch insurance, so I'll take a look at everything then to see how I want to rebalance at that point.
Title: Re: TSP allocations?
Post by: Villanelle on March 28, 2019, 01:48:24 PM
My allocation won't be terribly helpful because we have investments beyond TSP so that factors in to our overall allocation choices.  But I will agree that if you think there is a very good chance of making it to a pension, that drastically reduces the need for bonds.

My husband is military and at the pension point (though will still work for at least a few more years).  If he were on board, I'd be zero% bonds, but we are at about 10% because that makes him more comfortable, and isn't a large enough difference that I'll willing to fight very hard.
Title: Re: TSP allocations?
Post by: Kierun on March 28, 2019, 02:48:25 PM
My allocation won't be terribly helpful because we have investments beyond TSP so that factors in to our overall allocation choices.
Similarly, my TSP is heavy in the I fund since my non-TSP accounts already contain funds similar to the C and S funds.