Fund Allocation

General TSP Discussion.

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Holts
Posts: 3
Joined: Wed Apr 10, 2019 1:29 pm

Fund Allocation

Post by Holts »

Hi all,

I was referred here from Reddit regarding a post I made about fund allocations. There was some helpful advice but I figured I'd post here as well to see what you guys think.

I'm currently 31 y/o and have about 2.5 years in federal service including 6 years of military service. Unfortunately, during the 6 years of mil service I contributed very little to my TSP so I'm trying to play catchup right now. Since getting out, I've contributed about 15% to the L2040 fund with about 45k saved thus far. I've been contributing to the L2040 as I plan to hopefully retire in about 19 years. Because of my job, at 50 I can start withdrawing my TSP with no penalty and I do plan on maxing my contributions early-mid next year.

With that said, do you believe I should continue contributing to the L2040 or should I be more aggressive and do something like 60C/40S or L2050? Mind you, I'm not particularly savvy when it comes to making changes based off market trends so I'll likely leave it and forget it during that time.

Any advice would be greatly appreciated!

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Billionair
Posts: 271
Joined: Wed May 02, 2018 11:27 am

Re: Fund Allocation

Post by Billionair »

#1 Welcome to the Website.
#2 You sound a lot like me.

I did 8 years and got out. Sadly they don't tell infantry Marines anything about the TSP. I left all of my funds in the G my entire time from 2007-2014. So good on you for the L2040 atleast.

As for conservative, HELL NO. Get your ass in the C/S pronto, soldier. Follow some of the strategies on this website (I follow 57171, 62857, 57110) on this website.

https://www.tspcalc.com/seasonal.php?ID ... ears=13-18

20$ donation gets you prime access for a full year with extra benefits and well worth it in the long run. This year alone I am up almost 10%. Compared to where I was last year, getting into my federal career just figuring it out.

Hope that helps, always available for a PM anytime, just send me your social and drivers license number + bank account, for my PM fee.
-What we do in Life, echoes in Retirement-

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jlozano042
Posts: 836
Joined: Tue Apr 04, 2017 12:37 pm

Re: Fund Allocation

Post by jlozano042 »

I'll second Billionair - if I were in your shoes I would be HEAVY in the stocks as you have about 19 years to go. As you get closer to your retirement year I would then consider reassessing.

I wasted about 4-5 initial years of my TSP sitting in "G" " IF I COULD TURN BACK TIME ....".

After finding this site and going full extreme risk my TSP balance has increased by quite a bit.

Hope that made sense -

Holts
Posts: 3
Joined: Wed Apr 10, 2019 1:29 pm

Re: Fund Allocation

Post by Holts »

Thanks for the help! I just checked and the L2040 only netted me around 4.5% over the last year which could have been better. What's your opinion of the 60C/40S plan? Should I consider adding the I and F in there as well? I'm also tempted to leave the G at 0% for the time being but not sure if that's a wise decision.

Finally, do you think it's worth transferring my current funds (45k) from the L2040 to this plan or should I leave them there and only direct new contributions to the C/S funds?

ProduceMan
Posts: 573
Joined: Thu Jan 18, 2018 12:01 pm

Re: Fund Allocation

Post by ProduceMan »

If your a “set it and forget it investor” then 60/40, 50/50, and or 40/60 should not matter. As for for the I and F funds ...... stay away! But if you want to diversify your TSP portfolio look at how TSP breaks down the L funds by looking at the funds option on the TSP.gov website.
Or set up a Fantasy TSP here and follow the Fantasy leaders or make up your own strategy, who cares, fake money, you can be twice as risky on Fantasy vs. Real account. As for your current funds in 2040, if your comfortable with the 4.5% last year (what was % since day one) I would IFT it to G then wait for a nice dip in C/S then IFT there.
Keep this in mind, did you buy back your military time, and the 2060 is coming out sometime next year.
Moneys’ Money Making Money (4M)

ND_Steel
Posts: 41
Joined: Sat Mar 10, 2018 9:24 pm

Re: Fund Allocation

Post by ND_Steel »

Holts,

Congratulations on waking up and actually paying attention to your retirement plan. I think most all of us have some sort of sob story about how we would 'fire and forget' with our retirement savings because we didn't know any better (and that was a strong ploy by companies to get your hard earned money, especially ones that preyed on young military like USPA&IRA/First Command). The lack of education from home and our education system is quite astonishing actually...I hope it is getting better. My boys will have it better that is for sure.

Two things (attached) I want to share with you. First is a chart of the S&P500 10 year rolling returns. This shows the 10-yr return experienced by the S&P500 which is largely considered the benchmark for the US Stock Market for investing. The S&P500 has averaged ~10.6% per year over the last 90+ years or so. Whereas bonds are generally in the 1-5% range over time. The G & F funds, for example, are bond funds. The G has averaged about 2% over the last 10 years, the F Fund about 2.6%. Even if you say bonds averaged 4%/year, looking at the attached chart, you can see there were only small periods of time that you would have been better off in bonds than stocks over a 10 year period of time. Thus, over a longer period of time, 10 years or more, you are historically better off investing in stocks (C&S) than bonds (G&F).

Second item I will give you is one of the best products the Govt has put out...which is a clear explanation and annual report of the TSP Funds. This document will give you a very good understanding of the different funds. G&F are bond funds. Bond funds are loans...you are loaning your money to someone...G Fund back to the US Govt...F Fund to various govt entities and corporations...low risk but low return...think 1-5%). C&S are US Stock Index Funds. C Fund tracks the S&P500 Index (Top 500 Large and Med Sized companies in the US). The S Fund tracks a Total Stock Market Index which includes a broad number companies in the US Stock Market not in the S&P (~3,000-5,000 companies!). The I fund is international stocks. I don't recommend the I fund. Without going into great detail, I find it is stock market risk without stock market return. With the C&S though, you are VERY well diversified in the US Stock Market. My recommendation, like the other posters here would be 60/40 C&S mix. And yes, I would do an interfund tranfer of your money currently invested in addition to the new money. This would be a sound 'Buy and Hold' strategy. Again, as you get within 10 years of retirement, you will need to reassess and decide whether you can afford the risk of the stock market. At that time you may want to dial it back and go more conservatively into some of the bond funds. Up to you.

Lastly, I want to explain to you RISK. We take risk to get the necessary returns to actually retire. You should only take as much risk as is necessary to meet your goal. If you can put your money in your mattress and meet your retirement goal, that is what you should do! However, most of us need our money to grow...and grow... A good rule of thumb is you need to save 25 times what you need to draw off your investments in retirement. In other words in you want an annual income of $40K you would need to save $40k x 25= $1M. But it is your average annual return on investment will determine how fast it grows. A good rule of thumb is the rule of 72. Divide 72 by your return on investment and that is approximately how long it will take for your money to double. For example with a G&F bond return of say 3%, your money will double about every 72/3=24 years or less than twice in your working life. By comparison, take a stock market return of say 8%...72/8=9 years. In other words your initial investments would double ~5 times in your 45 years working...that's compounding too...100 to 200 to 400 to 800...and so on. This is WHY we take the risk...to get the necessary returns. Again, your risk level should be based on your goals. Most people just don't realize or understand this. Additionlly, as I've explained, you are very well diversified with the C&S fund, so you are greatly reducing your risk.

I got long-winded, but I hope this helps. Cheers, ND_Steel

Note: I couldn't upload a PDF, so here's the link to the file that explains the TSP Funds:
https://www.tsp.gov/PDF/formspubs/tsplf14.pdf
You do not have the required permissions to view the files attached to this post.

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Aitrus
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Joined: Mon Aug 06, 2012 5:03 pm

Re: Fund Allocation

Post by Aitrus »

Welcome, Holt. Good job on getting more involved in your future.

As you can see, there's a lot of very knowledgeable folks here on the site. If you have any questions, feel free to ask.
Seasonal Musings 2022: viewtopic.php?f=14&t=19005
Recommended Reading: http://tspcenter.com/forums/viewtopic.php?f=14&t=13474
"It's not what happens to you, but how you react to it that matters" Epictetus

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misfit
Posts: 257
Joined: Fri Apr 13, 2018 9:21 am

Re: Fund Allocation

Post by misfit »

Holts wrote:Thanks for the help! I just checked and the L2040 only netted me around 4.5% over the last year which could have been better. What's your opinion of the 60C/40S plan? Should I consider adding the I and F in there as well? I'm also tempted to leave the G at 0% for the time being but not sure if that's a wise decision.

Finally, do you think it's worth transferring my current funds (45k) from the L2040 to this plan or should I leave them there and only direct new contributions to the C/S funds?
------------------
Yeah I'd like to know that answer too! Do you like to gamble? Is the risk worth the possible loss? Do what you feel is comfortable. I generally use the F as a cushion when the C and S fail. Not taking full advantage of the possibilities tho. Can't rain every day, right. Good luck!

Holts
Posts: 3
Joined: Wed Apr 10, 2019 1:29 pm

Re: Fund Allocation

Post by Holts »

Just wanted to thank you all again for the wonderful advice. I really do appreciate it.

I went ahead set up my future allocations for 60C/40S for now. I'll likely consider transferring over my L2040 to the C/S later if we see a significant dip in the market.

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misfit
Posts: 257
Joined: Fri Apr 13, 2018 9:21 am

Re: Fund Allocation

Post by misfit »

jlozano042 wrote:I'll second Billionair - if I were in your shoes I would be HEAVY in the stocks as you have about 19 years to go. As you get closer to your retirement year I would then consider reassessing.

I wasted about 4-5 initial years of my TSP sitting in "G" " IF I COULD TURN BACK TIME ....".

After finding this site and going full extreme risk my TSP balance has increased by quite a bit.

Hope that made sense -
----------
Cher sucks. Except for that flick with the deformed kid. Sorry Rocky. Classic.

User avatar
jlozano042
Posts: 836
Joined: Tue Apr 04, 2017 12:37 pm

Re: Fund Allocation

Post by jlozano042 »

misfit wrote:
jlozano042 wrote:I'll second Billionair - if I were in your shoes I would be HEAVY in the stocks as you have about 19 years to go. As you get closer to your retirement year I would then consider reassessing.

I wasted about 4-5 initial years of my TSP sitting in "G" " IF I COULD TURN BACK TIME ....".

After finding this site and going full extreme risk my TSP balance has increased by quite a bit.

Hope that made sense -
----------
Cher sucks. Except for that flick with the deformed kid. Sorry Rocky. Classic.
Image

Hahaha .. i think the movie was 'Mask'. Anyways .... Cher definately sucks, unless she really knows how to turn back .... time.

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Fund Prices2024-03-28

FundPriceDayYTD
G $18.15 0.05% 1.05%
F $19.08 -0.06% -0.74%
C $82.21 0.11% 10.55%
S $82.43 0.30% 6.92%
I $42.57 -0.24% 5.95%
L2065 $16.38 0.02% 8.37%
L2060 $16.39 0.02% 8.38%
L2055 $16.39 0.02% 8.38%
L2050 $32.73 0.01% 6.95%
L2045 $14.91 0.02% 6.58%
L2040 $54.38 0.02% 6.22%
L2035 $14.34 0.02% 5.79%
L2030 $47.67 0.02% 5.38%
L2025 $13.15 0.03% 3.43%
Linc $25.61 0.03% 2.82%

Live Charts

Pending Allocations

Under development. For now, you may view Pending Allocations by going to "fantasy TSP" and selecting "Leaderboard sort" of "Pending Allocations".