TSP strategy for mid 40's with 20 years till retirement. Anyone? Bueller?

[coastalite]

Hello to all and thank you in advance for any advice and opinions you may have. I am in need of some help and am so happy to have stumbled onto this site.

I've been saving for a good 15+ years or so, investing $630 each month into my TSP and have pretty much been going 50% into C, 25% into S, and 25% into I.

I have $21.5K (9%) sitting alone in F with no money allocated to it. The rest of the money is 57% sitting in C, 18% in S, and 16% in I with a grand total of $260K saved.

I kind of stuck my head in the sand and took a beating when the economy soured. I don't know if I should moved everything to G & F so I just kept everything status quo (in C, S, & I).

It appears that S (down 7.63% for 2011) & I (down 14.90&) aren't doing very well in 2011. Should I get out of I completely? Am I foolish to sit here and take a beating in I or is the thought that it is wise to stay in because I am buying shares at a lower price in hopes they will go back up?

Is it time to start going a bit more conservative now that I am in my mid 40's?

I was thinking about changing it up and doing an Interfund Transfer AND Re-Allocating everything to: 25% C, 25% F, 25% S, and 25% G.

Thoughts?

[Birchtree]

You'll be invested long after you retire - stay with your current program. Slow money with dollar cost averaging is the best approach. Accumulate as many shares as you can at these lower prices. When the market finally sees the light you'll zoom even faster than imaginable.

[nasa1974]

coastalite, This is a great place to learn. Welcome aboard. Sure sounds like you have been doing a good job so far. Good luck.

[nnuut]

Welcome to the Board coastalite!
Best of luck.
Norman

[coastalite]

Thanks for the replies. I was hoping to get a few more opinions on moving everything to 25% G, 25% F, 25% C, & 25% S?

Also, would like to allocate future contributions to 25% G, 25% F, 25% C, & 25% S.

My thinking is that in my mid 40's I can't afford to be too risky, so half my money should be in the more stable G & F, and the other half in the more risky C & S.

As I'm getting older, I feel the need to be more proactive and keep a much closer eye on these funds, and not necessarily just sit back with my head in the sand (like I've been doing).

If I see any indication that one fund is taking off or others tanking, I'll try to IFT my money around accordingly.

[nasa1974]

Thanks for the replies. I was hoping to get a few more opinions on moving everything to 25% G, 25% F, 25% C, & 25% S?

Also, would like to allocate future contributions to 25% G, 25% F, 25% C, & 25% S.

My thinking is that in my mid 40's I can't afford to be too risky, so half my money should be in the more stable G & F, and the other half in the more risky C & S.

As I'm getting older, I feel the need to be more proactive and keep a much closer eye on these funds, and not necessarily just sit back with my head in the sand (like I've been doing).

If I see any indication that one fund is taking off or others tanking, I'll try to IFT my money around accordingly.

You hit the key word, RISK. It really comes down to what you are willing to put out there. What I would say is look at how you have your allocation spread out. One thing to remember, you only have 2 IFT's for the month but you can allocate your money to different funds at different percentages twice a month if you want to, but the timing can be tricky. If you are looking for small share growth then spreading your money around is the right thing. What you might think about is putting 100% in a specific fund for a month or two depending on how well the fund is doing then move 100% into a different fund. The one place you may want to increase your shares might be the I fund. Once this Euro thing is cleared up I think the I fund will get back over $21 pretty quickly. At 25% per fund your share growth will be small but you will have less risk of large losses. I think the most funds I spread my allocation to was 3, CSI, at any combitation of 30%,30%,40%. You still have some good years to make a big impact to your TSP. Good Luck!!

[ILoveTDs]

If you have 20 years the G Fund is for suckers, it doesn't even keep up with inflation. If god forbid you are talking about a buy and hold strategy in a conservative fund, at least put your funds in the F Fund - AVOID THE G FUND!!!!!!!!!!!!!

G Fund 2 June 2003 = $10.00 today = $13.80 i.e. 38% in last 9 1/2 years.
F Fund 2 June 2003 = $9.97 today =$15.30 i.e. 53.5% in last 9 1/2 years.

[coastalite]

What you might think about is putting 100% in a specific fund for a month or two depending on how well the fund is doing then move 100% into a different fund. The one place you may want to increase your shares might be the I fund. Once this Euro thing is cleared up I think the I fund will get back over $21 pretty quickly. At 25% per fund your share growth will be small but you will have less risk of large losses. I think the most funds I spread my allocation to was 3, CSI, at any combitation of 30%,30%,40%. You still have some good years to make a big impact to your TSP. Good Luck!!

Good stuff. Thanks. I am beginning to see the big picture. Maybe I'll take your 30-30-40 CSI advice. Curious, why not F? Over the last 12 months, F is at 5.68%, outperforming both S & I.

What are your thoughts on moving it all into L2030 and walking away?

[coastalite]

If you have 20 years the G Fund is for suckers, it doesn't even keep up with inflation. If god forbid you are talking about a buy and hold strategy in a conservative fund, at least put your funds in the F Fund - AVOID THE G FUND!!!!!!!!!!!!!

Yeah, I hear ya, but the G Fund since inception is 5.93%. F since inception isn't much better at 7.09%.
Since inception, I is the WORST at only 4.43%, but has only been around since May 2001.

If looking long term, based on rate of return since inception, C is the best at 9.55%.

Why not just go 100% C if it's showing the best rate of return over the long haul?

[coastalite]

Judging from your statement, you seem to be asking for the long term stability that the L-Funds already provide.
If you're going to work till age 60-65 and want to have a steady allocation that you might only change infrequently (less than 3 times a year ) then going into the L2030 might meet your longer term goals.

If you want to stay more aggressive, and learn how to manage your money at the same time, the best thing to do (what I did) was sign up for one of the pay services from this site who typicaly shift you from 100% stocks to 100% G and/or F based on a variety of time proven statistical and heuristical methodology. You can ask Tom (who runs this site) more about them, or read about them on the main homepage.

At the same time, reading Tom's daily wrap up every evening (also on the main homepage) is a great way to learn on the fly. And when one of the premium service gives you a buy or sell signal you can follow what some of Tom's (or Coolhands, JTH's) charts are showing and follow along. You will likely start seeing patterns developing and you can then (on the side) start making moves on the side on Tom's Autotracker and see how your new found skills are shaping up to what the pay services (or the L Fund) are doing for you. Read the blogs and the forum posts here...engage in debate...great places to learn form others (or share what you've learned).

After some time, you may feel your tools are sharp enough to go out on your own. Or you might like the returns the pay services or the L Fund provides.


Question... what do the L Funds have against investing in the F Fund? For example, L2030 starts F at 9% and then 25 years later it slowly ends up at 6% in F. I didn't think F was that risky, so why end up at only 6%?

Another problem I have with L is how much of a percentage is invested in G. For Jan 2012, it is 23.15% going to G. Do I really want that much sitting in G when that money could be missing out on serious growth in C S or I?

What if I were to loosely follow the model of L2030, but do it manually with my own tinkering? If you go to the tsp site you can adjust the slide on the L2030 pie chart to see what the % invested in each of GFCSI at any given qtr all the way up to 2030. Jan 2012 for example is (GFCSI) 23.15/8.35/35.40/13.40/19.70. I was thinking it should be more on S and F, and less on I and G. Thoughts?

[Boghie]

Coastalite,

I didn't respond because I thought FWM's response was on target. And, anyone who has perused these boards knows that I am rarely silent on FWM commentary.:p

Anyway,


Prior to more advanced investing I strongly recommend Ric Edelman's (http://www.amazon.com/s/ref=nb_sb_ss_i_0_5?url=search-alias%3Dstripbooks&field-keywords=ric+edelman&sprefix=Ric+E) and Ray Lucia's (http://www.amazon.com/s/ref=nb_sb_ss_i_0_5?url=search-alias%3Dstripbooks&field-keywords=ric+edelman&sprefix=Ric+E#/ref=nb_sb_ss_i_0_7?url=search-alias%3Dstripbooks&field-keywords=ray+lucia&sprefix=ray+luc&rh=n%3A283155%2Ck%3Aray+lucia) books. They are on personal finance rather than investing. They explain risk and asset allocation and long term investing strategies. I especially recommend 'The Truth About Money', the 'Lies About Money', and 'Buckets of Money'. You will learn why the allocation to the 'F Fund' reduces as you get closer to retirement age. But, why not answer that question...

The 'F Fund' - and in fact all the F/C/S/I Funds have risk. The 'G Fund' has no risk. When you move the little slider bar on the L2030 Fund to the right you are actually moving into the future and closer to retirement. Magic:). If you watch closely the F/C/S/I Funds all shrink and the 'G Fund' increased in allocation ratio. At 60 years old (at about 2025 I guess since I think you mean to retire at age 65) you are 50% in the cash/bond funds (G/F) and 50% in the equities funds (C/S/I). Right now, the L2030 fund is 31% G/F and 69% C/S/I. Basically, the L Funds get safer as you near its final date. They do not market time or change allocation based on charts or whatever.

So, after reading the above, a person with a 50% bond (G/F) allocation is investing like a sensible 60 year old. You sound like a sensible 45 year old. If you are not advanced enough (yet) to use technicals and fundamentals to trade at the edge than you are limiting your retirement severely. I use Quicken Premier to attain the 'Expected Return' and 'Expected Risk' noted below for you allocation and the L2030 allocation in 2025:

25% G / 25% F / 25% C / 25% S : Expected Return = 4% / Expected Risk = 7%
43% G / 7% F / 27% C / 8% S / 15% I : Expected Return = 4% / Expected Risk = 5%

As you can see, a scientifically allocated portfolio generates the same expected return at significantly less risk.

As you can see, you will be scaping Alpo from a rusty can if you invest long term like a 60 year old when you are 45. If you are not following a trading method - and thus holding a bit in reserve till some market tells you to get back in - than you will not have a rewarding retirement. At 45 you should spend as much time in equities as you can with as much allocated toward equities as you can stomach.


Finally, unless you have the skill - and luck - to implement technical trading don't worry about day or week trading. Try instead to get a read on the big moves. For example 2008 wasn't really a mystery and 2009 (from maybe May onward) wasn't a shock. Who really cares about October 23 2009 or whatever. But, you might care about October 2008:embarrest:.

[coastalite]

The 'F Fund' - and in fact all the F/C/S/I Funds have risk. The 'G Fund' has no risk. When you move the little slider bar on the L2030 Fund to the right you are actually moving into the future and closer to retirement. Magic:). If you watch closely the F/C/S/I Funds all shrink and the 'G Fund' increased in allocation ratio. At 60 years old (at about 2025 I guess since I think you mean to retire at age 65) you are 50% in the cash/bond funds (G/F) and 50% in the equities funds (C/S/I). Right now, the L2030 fund is 31% G/F and 69% C/S/I. Basically, the L Funds get safer as you near its final date. They do not market time or change allocation based on charts or whatever.


I understand in principal how the L Funds work, but since I am not knowledgeable enough to IFT from week to week or month to month, I am leaning towards just putting everything in L2030 and walking away. I'm beginning to understand why the L Funds don't invest a little more in F. I know F does have some risk, but looking at it since inception, it appears to be somewhat of a safe investment, with no big losses from year to year. Take 2008 for example, CSI all took a beating, but F gained 5.45%. Would it have been better to be 100% in F for 2008, or weather the storm and stay in C,S, & I and buy in at lower share prices in hopes of rebounding and bigger future gains???







So, after reading the above, a person with a 50% bond (G/F) allocation is investing like a sensible 60 year old. You sound like a sensible 45 year old. If you are not advanced enough (yet) to use technicals and fundamentals to trade at the edge than you are limiting your retirement severely. I use Quicken Premier to attain the 'Expected Return' and 'Expected Risk' noted below for you allocation and the L2030 allocation in 2025:As you can see, a scientifically allocated portfolio generates the same expected return at significantly less risk.





25% G / 25% F / 25% C / 25% S : Expected Return = 4% / Expected Risk = 7%
43% G / 7% F / 27% C / 8% S / 15% I : Expected Return = 4% / Expected Risk = 5%




I should probably just go with L2030 and be done with it.





As you can see, you will be scraping Alpo from a rusty can if you invest long term like a 60 year old when you are 45. If you are not following a trading method - and thus holding a bit in reserve till some market tells you to get back in - than you will not have a rewarding retirement. At 45 you should spend as much time in equities as you can with as much allocated toward equities as you can stomach.


I'd rather not eat dog food if I can help it, so I better follow the age appropriate investment strategy.





Finally, unless you have the skill - and luck - to implement technical trading don't worry about day or week trading. Try instead to get a read on the big moves. For example 2008 wasn't really a mystery and 2009 (from maybe May onward) wasn't a shock. Who really cares about October 23 2009 or whatever. But, you might care about October 2008:embarrest:.


Thanks for all your advice!

[Boghie]

Coastalite,

Don't let me scare you to the point of a pure buy and holder. Especially with the L Funds.

The current holdings in the L2030 are:

G: 23.15%
F: 8.35%
C: 35.40%
S: 13.40%
I: 19.70%
Expected Return: 5%
Expected Risk: 7%The expected return is inflation adjusted. Thus your annual return for L2030 is actually 8%. What the risk actually means is that you can expect anything from +12% to -2% in any single year. (Actually pre-inflation adjusted it would be +15% to 1%).

My one concern about using the L Funds is their allocation into the I Fund. Personally, I think that is one of the easy reads I was talking about. I would probably dump it a bit. And, why hold cash at all. My personal allocation is:

G: 0% - At my age I really don't want anything (or much) in 'cash'
F: 20% - To me, the 'F Fund' US Gubmint bonds and mortgage holdings are bubbly and crashy, but I don't know
C: 45% - Overallocate the L2030 G/I Fund holdings here
S: 30% - Overallocate the L2030 G/I Fund holdings here
I: 5% - Who knows when the bottom hits. My guess is that I will bump this to 7% or 8% this week
Expected Return: 7%
Expected Risk: 10%
My advice would be to use the L2030 as a starting point and adjust the allocation a bit based on the easy reads. Europe and Japan are trash right now. They look like we did in 2008.

[coastalite]

Thanks, I think rather than just sit in L2030, I will do something similar to your allocation. I'm tired of taking big losses. My 3rd qtr wasn't pretty.

What do you think is an appropriate allocation for someone in their low to mid 40's?

Are you going to max out to the new limit of $17,000 for 2012? How do you go about doing that?

What does that come out to, $653.84 for 26 pay periods? But that amount is with matching?

[Boghie]

CoastaLite,

I see you went 25/25/25/25/0 G/F/C/S/I.
Expected Return: 4%
Expected Risk: 7%

I agree (for what it is worth) that the 'I Fund' has the most risk of all five funds. However, the 'F Fund' will get hammered when interest rates are rumored to go up. Watch that one like a hawk. And, an allocation with a long term track record of a 4% return should not be something you hold for a long time at your age. You've got to get in the 6% - 8% (inflation adjusted - means 9% - 11%) which is available with a higher equities (C/S/I) allocation. You can mix in some F to smooth it out. My current 0/15/47/31/7 allocation has a return of 7% (10%) with a risk of 10%. I'm in my mid-40s. This is close to my normal average market allocation with some dump from I to S.

I am still paying off some debt. Gotta do that before putting more money in a retirement account.

And, yes the $17,000 ($650/pp) does include the matching. The match will be 5% of your gross salary. If you have a high salary watch out that you do not over contribute. Take 5% of your gross salary, subtract it from the $17K, and you get the total amount you can invest - then divide that by 26. Remember, the tax savings will mean that you will not feel the whole punch of contributing $650/pp. That math is way to hard to do here - but it is a very nice feature of a 401(k).


Thanks, I think rather than just sit in L2030, I will do something similar to your allocation. I'm tired of taking big losses. My 3rd qtr wasn't pretty.

What do you think is an appropriate allocation for someone in their low to mid 40's?

Are you going to max out to the new limit of $17,000 for 2012? How do you go about doing that?

What does that come out to, $653.84 for 26 pay periods? But that amount is with matching?

[Kaufmanrider]

CoastaLite,
And, yes the $17,000 ($650/pp) does include the matching. The match will be 5% of your gross salary. If you have a high salary watch out that you do not over contribute. Take 5% of your gross salary, subtract it from the $17K, and you get the total amount you can invest - then divide that by 26. Remember, the tax savings will mean that you will not feel the whole punch of contributing $650/pp. That math is way to hard to do here - but it is a very nice feature of a 401(k).

If I am reading this right, I think you are mistaken. The $17,000 dollar IRS limit for contributions is the amount you can deposit from your base pay. The matching funds from the government, up to 5% max, is not part of the $17,000 but in addition to it. Therefore, you can contribute the full 650 (rounded) a pay period x 26 pay periods out of your base pay.

[Boghie]

Kaufmanrider,

I just researched the affect of the match on the limits again. Like everything else in our Byzantine tax code it is confusing.

However, you are 100% correct. The employee is entitled to contribute $17,000 toward his/her 401(k). The match is limited to 6% (we get 5%). That match does not affect your contribution limit. Geez, that makes the math much easier...

[Kaufmanrider]

Kaufmanrider,

I just researched the affect of the match on the limits again. Like everything else in our Byzantine tax code it is confusing.

However, you are 100% correct. The employee is entitled to contribute $17,000 toward his/her 401(k). The match is limited to 6% (we get 5%). That match does not affect your contribution limit. Geez, that makes the math much easier...

I thought so, otherwise I would owe back taxes :)

[coastalite]

I see you went 25/25/25/25/0 G/F/C/S/I.
Expected Return: 4%
Expected Risk: 7%


Yeah, I really struggled with what to do but thought this might be safer for the short term than what I had been doing.



I agree (for what it is worth) that the 'I Fund' has the most risk of all five funds. However, the 'F Fund' will get hammered when interest rates are rumored to go up. Watch that one like a hawk. And, an allocation with a long term track record of a 4% return should not be something you hold for a long time at your age.

Thanks for the advice on F. I will watch it. My current 25/25/25/25/0 allocation is short term. I wanted to get out of I and diversify while I figure out what to do. Not sure if that was really a wise thing to do or not. I had been asleep at the wheel contributing 50% to C, 25% to S and 25% to I for some years now... not sure how wise that was wise either, but at our last sit down a couple years ago with our financial adviser, we were told that allocation was good for our timeline.


You've got to get in the 6% - 8% (inflation adjusted - means 9% - 11%) which is available with a higher equities (C/S/I) allocation. You can mix in some F to smooth it out. My current 0/15/47/31/7 allocation has a return of 7% (10%) with a risk of 10%. I'm in my mid-40s. This is close to my normal average market allocation with some dump from I to S.

I plan to reallocate next month something close to yours.

What do you think about maybe doing 5/10/45/35/5?

[coastalite]

The $17,000 dollar IRS limit for contributions is the amount you can deposit from your base pay. The matching funds from the government, up to 5% max, is not part of the $17,000 but in addition to it. Therefore, you can contribute the full 650 (rounded) a pay period x 26 pay periods out of your base pay.

I did not realize this. I had been contributing something like $420 per pay period ($10,920 per year) + a $210 match ($5,460 per year) = $630 per pay period. $630 x 26 = $16,380 which was close to what I thought was the 2011 $16.5K limit.

So you are saying we can contribute $653.84 x 26 = $16,999.84 but then the match wouldn't change, would it? It would remain maxed out at $210 each pay period? $210 x 26 = $5,460.

So, the most we can put in for 2012 is $17,000 + the $5,460 match on top of it = $22,460. Is this right? Unless you are 50 and then can put an additional $5,000 in "catch up" contributions.

[Boghie]

Coastalite,

Sounds like you got some real mullah you can invest toward your retirement. I'll probably be there next year or early in 2013. With that much going in I would probably meet with a fee only financial advisor - one that can look at all your financial needs. It would probably cost about $500. Ray Lucia is local to me so I visited him. He told me that I was on target and to just continue as I had been. He gave me a baseline allocation. Additionally, Ric Edelman has affiliates all over (as does Lucia). Obviously, there are good local advisors as well.

You are talking serious money and serious tax law and serious investing. Seek a serious financial advisor - not just someone playing one on TSPTalk (me:p). I don't want you fighting the other inmates in some White Collar Club Med Slammer because of some advise I proffer :nuts:

[coastalite]

Sounds like you got some real mullah you can invest toward your retirement. I'll probably be there next year or early in 2013. With that much going in I would probably meet with a fee only financial advisor - one that can look at all your financial needs. It would probably cost about $500. Ray Lucia is local to me so I visited him. He told me that I was on target and to just continue as I had been. He gave me a baseline allocation. Additionally, Ric Edelman has affiliates all over (as does Lucia). Obviously, there are good local advisors as well.
You are talking serious money and serious tax law and serious investing. Seek a serious financial advisor.


I really don't know that we can afford to bump it up to max out our contributions. Going from about $11k to $17k is a big jump. An extra $6k is basically $230 more per month. I'll have to look at it from a tax standpoint. Maybe that extra $6k contribution might put us in a lower bracket, in which case it might make sense to do. I'll have to ask our financial advisor.

Speaking of which, we do have "a serious financial advisor". Have you looked at "First Command (http://www.firstcommand.com/about-first-command.htm)" and their military advisory board (http://www.firstcommand.com/military-advisory-board.htm)? It used to be that they only handled military. Then they started allowing Civil Svc, and now anyone can go to them. They handle some of our other investments, advise us on our TSP, and they look at the big picture once per year. They take it ALL into account and advise us accordingly. It is a free svc. However, if you set up any other investments/insurance through them, then they make account maintenance fees off that. The problem IMO, as with any advisor, is that you don't really know if the investment vehicles they are promoting are really 100% in your best interest, or are they promoting them because they're in their own best interest and making them the most in commissions and fees, etc. We do trust First Command though, simply because of their heavy involvement that specialized in financial advising for members of the US military. If the military trusts in them, nuff said.

[alevin]

Kaufmanrider,

I just researched the affect of the match on the limits again. Like everything else in our Byzantine tax code it is confusing.

However, you are 100% correct. The employee is entitled to contribute $17,000 toward his/her 401(k). The match is limited to 6% (we get 5%). That match does not affect your contribution limit. Geez, that makes the math much easier...

Boghie buddy, not sure where you get 6% from. It's 3% match to our first 3% (not including the automatic 1%). After that, they match .5% for each additional 1% we put in-up to maximum 5% match.

[Kaufmanrider]

Boghie buddy, not sure where you get 6% from. It's 3% match to our first 3% (not including the automatic 1%). After that, they match .5% for each additional 1% we put in-up to maximum 5% match.

I think he is referring to IRS limits.

[coastalite]

This morning I decided to move the 25% I had in F into G. So, I went from 25/25/25/25/0 to 50/0/25/25/0.

F was making me a little nervous so I am now camped out 50% in G, 25%C and 25%S.

For 2012, I think my strategy will be to watch closely and see if there's any kind of consensus to what the top 50 (http://www.tsptalk.com/tracker/tsp_user_balance_all.php) are doing and see if I can time some of my moves with theirs.

28 of the top 50 are 100% in S right now. 36 out of the top 50 have at least 25% in S.

Only 6 are 100% G, and 5 are 100% F.

[coastalite]

Well, I had my TSP at 50% G 25% C 25% S and just moved it a day or two ago to 75% S 25% C (just in time to see the DOW to drop 100+ & the S&P to drop 13+ as of 12:30 pm today). My timing is impeccable.

Maybe the market will rebound by the end of the day?

[Kaufmanrider]

Well, I had my TSP at 50% G 25% C 25% S and just moved it a day or two ago to 75% S 25% C (just in time to see the DOW to drop 100+ & the S&P to drop 13+ as of 12:30 pm today). My timing is impeccable.

Maybe the market will rebound by the end of the day?

Probably next week. I think today is an emotional response (knee jeck reaction) of the possible SP downgrades of European Countries. What has changed? We know they are having problems in Europe, so SP drops them, the interest rates for most of the countries high as it is.

[coastalite]

Maybe the market will rebound by the end of the day? I kinda doubt it with what's going on in Europe.

Speaking of Europe, I wish I had a crystal ball to see where the bottom of the I Fund is.

It's hard to imagine TPTB allowing the global economy to come crashing down.

Are we ever going to see fiscal sanity?

Another $1.2 Trillion? OMG! Wake me up from this nightmare.

[coastalite]

Wow, the markets are up today (thank you stronger than expected growth in China).

Go figure. Glad I didn't move everything to G. I was thinking about moving it all to G after Friday's performance and worry over Europe.


Also, does anyone know when the TSP is going to release 2011's annual statement?

[roskopfj]

Well, just because the S fund didnt do good in 2011 doesnt mean you should drop it. Take a good look at it year by year. It is the best fund around. I currently am 70% S and 30% C. I am 41 and have about 135,000 in the TSP, about 100K is in the S. The stock market is going to keep rising as employment improves and people start buying more. However you want to do it keep it in C or S, but not that much in I. The experts say this is the year for US stocks. Europe is going back into recession and the rest of the world is going slower than us, I used to be I but not anymore. I only go to safety of G or F when the market is going to crash like 2008.

[coastalite]

When can we expect to see our 2011 TSP annual statement?

[wvango]

The TSP issues quarterly statements in January, April, July, and October, and annual statements for each preceding year in February.

[coastalite]

Yesterday was two steps forward, today was one step back.

[coastalite]

I kinda wish I had never messed with my original allocation of 25s 50c and 25i (I think is what it was). I probably should have just held that and DCA'd it.

In retrospect, if I had just held that, I might be around 30% for 2013.... but since I allowed fear of a major correction to worry me - I spent valuable time parked in G, and therefore, I will be lucky to get a 13% return for 2013. I'm not really complaining, as my return could have been far far worse.

I learned a valuable lesson in that if you stink at investing, you might be better off with a buy and hold strategy.

I am thinking about maybe going something like 30c 50s and 20i & just stick my head in the sand and see if I can sit on that & HOLD this allocation for ALL of 2014.

Thoughts?

[OBGibby]

I kinda wish I had never messed with my original allocation of 25c 50s and 25i (I think is what it was). I probably should have just held that and DCA'd it.

In retrospect, if I had just held that, I might be around 30% for 2013.... but since I allowed fear of a major correction to worry me - I spent valuable time parked in G, I will be lucky to get a 13% return.

I learned a valuable lesson in that if you stink at investing, you might be better off buying and holding. Thinking about going 30c 50s and 20i AND JUST HOLDING THAT FOR ALL OF 2014.


Live and learn, I suppose. I, too, feared a correction and spent too much time trying to figure out how to time the market. Wasted opportunity. Hopefully, I won't make that mistake again.

[PLANO]

I kinda wish I had never messed with my original allocation of 25s 50c and 25i (I think is what it was). I probably should have just held that and DCA'd it. In retrospect, if I had just held that, I might be around 30% for 2013.... but since I allowed fear of a major correction to worry me - I spent valuable time parked in G, and therefore, I will be lucky to get a 13% return for 2013. I'm not really complaining, as my return could have been far far worse.I learned a valuable lesson in that if you stink at investing, you might be better off with a buy and hold strategy. I am thinking about maybe going something like 30c 50s and 20i & just stick my head in the sand and see if I can sit on that & HOLD this allocation for ALL of 2014. Thoughts?I stay in stocks until my chart tells me to cash out. I'm not good enough at investing to try and time upswing, buy dips, etc. Half the time it works when I try it and half the time I take a hit and end up making less overall. The chart doesn't lie, just go with the trend, whatever it is. When my 15 day EMA goes below my 30 EMA, and my indicators are going negative, I run to G. If not, I ride out the dips and make most of the gains. The biggest advantage I see in this strategy is it gets you out early in the bear market so you don't take a huge loss and you are sure to make most, yet not nearly all, of the gains in a bull.http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=2&dy=0&id=p04846766144

[Boghie]

I kinda wish I had never messed with my original allocation of 25s 50c and 25i (I think is what it was). I probably should have just held that and DCA'd it.

In retrospect, if I had just held that, I might be around 30% for 2013.... but since I allowed fear of a major correction to worry me - I spent valuable time parked in G, and therefore, I will be lucky to get a 13% return for 2013. I'm not really complaining, as my return could have been far far worse.

I learned a valuable lesson in that if you stink at investing, you might be better off with a buy and hold strategy.

I am thinking about maybe going something like 30c 50s and 20i & just stick my head in the sand and see if I can sit on that & HOLD this allocation for ALL of 2014.

Thoughts?


A 0/0/30/50/20 allocation results in:

Expected Annual Return: 8% (11% before a 3% inflation chop)
Expected Annual Risk (Variance): 12%
That means that 2/3rds of the time you will land between -1% and 23% investment growth before inflation.

The 'C Fund' is:

Expected Annual Return: 7% (10% before a 3% inflation chop)
Expected Annual Risk (Variance): 16%
That means that 2/3rds of the time you will land between -3% and 26% investment growth before inflation.

The 'S Fund' is:

Expected Annual Return: 8% (11% before a 3% inflation chop)
Expected Annual Risk (Variance): 20%
That means that 2/3rds of the time you will land between -9% and 31% investment growth before inflation.

The 'I Fund' is:

Expected Annual Return: 8% (11% before a 3% inflation chop)
Expected Annual Risk (Variance): 18%
That means that 2/3rds of the time you will land between -7% and 29% investment growth before inflation.

*Numbers from Quicken's Investment Asset Allocation tool

So, you will be over-weighting in the highest risk fund - and the one that boomed this year. That is generally called chasing returns. A two standard deviation variance to the negative in the 'S Fund' will result in a -29% return on that part of your allocation. Personally, I would watch for the correction in the 'F Fund' (not invest there yet, but be ready) and over-weight the 'I Fund' which has been a bit of a laggard. Maybe a 0/0/30/20/50 split - which in a normal market should result in a 10%/11% pre-inflation Annual Return/Risk ratio. About what your allocation is, but kinda doing a bit of market timing and reducing risk in a bubbly fund. Also, it would not be stupid to have a decent chunk in the 'G Fund' - maybe 20% to 25% - to purchase more in a fund that pops. But, like you that thought has lost me money this year.

I would strongly recommend Ric Edelman's 'The Lies About Money' for setting an allocation. There is science involved. This ain't pure gamblin' and it ain't pure guesswork. And, a 13% return while holding risk at bay during a year of confusion ain't too bad. Those 'S Fund' holders could have just as easily been banging on the bottom with -20% returns as sitting on the top with +38% returns. The expected returns are about the same. All those chaps may have peed in the water a bit upstream - but all that stuff is already under our bridge by now, eh:p.

Anyway, your call.

[coastalite]

Live and learn, I suppose. I, too, feared a correction and spent too much time trying to figure out how to time the market. Wasted opportunity. Hopefully, I won't make that mistake again.

I don't think anyone can figure this market out - but I do know one thing - if you are parked in G: no risk = no reward.

[coastalite]

I stay in stocks until my chart tells me to cash out. I'm not good enough at investing to try and time upswing, buy dips, etc. Half the time it works when I try it and half the time I take a hit and end up making less overall. The chart doesn't lie, just go with the trend, whatever it is. When my 15 day EMA goes below my 30 EMA, and my indicators are going negative, I run to G. If not, I ride out the dips and make most of the gains. The biggest advantage I see in this strategy is it gets you out early in the bear market so you don't take a huge loss and you are sure to make most, yet not nearly all, of the gains in a bull.http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=2&dy=0&id=p04846766144


Thanks for your reply.

I really only recently in the last couple years - started trying to take a more "active" role in our retirement savings. When we hit our mid 40's - we started thinking it might be a good idea to start paying closer attention to our investments - and not just blindly trust our financial planner (like we had been doing for quite some time).

I won't say which company handles our financial planning - but we once trusted them - because they used to exclusively ONLY deal with the financial planning needs of members of our armed forces. We figured that if members of the military trust them, then why shouldn't we trust them as well (civil svc)? So, the company first dealt with only the military, then they added civil svc, but now - anyone can invest with them.

Anyway, our FP broke my trust a few years ago when he advised me to roll my old 401k into a fund that he highly recommended. The only problem is that he left out the part that there would be a rather costly "front load fee" involved. When a few months later I finally saw the huge amount (fee) taken out of my account - I about lost it and called him out on it - and he sat there & looked me in the eye & told me that he had most definitely mentioned the load fee. What a jerk! He may have glossed over it quickly - but he sure as heck didn't say anything about a $2,500 load fee to roll over into this fund - I think I would have remembered that - duh!). So, whatever man. That is a big reason why I am here in this forum today. I decided I wasn't going to let some dishonest jerkwad try to jack me around. If he pulled that one on me, no telling what else he was trying to pull over our eyes. Still irks me to this day, but a few months ago he got a nice surprise when he found that we pulled my 401k and both of our ROTH IRA's - and took our money over to Vanguard (where they have LOW FEES).

The old saying is true - that no one can better manage your money than you can. Our FP was out to line his own pockets - and he probably sent his kids off to college with part of our retirement savings - but I digress.

After doing further research a few months ago, I found that our FP had us parked in funds with HIGH expense ratio fees - about industry avg - something like 1.15% to 1.25% - not to mention the hidden 12b1 marketing fees - or whatever they call them. I feel like we had been taken advantage of for years... no telling how much we paid out in high fees over the years... So, I moved my IRA Rollover and both our ROTH IRA's to similar funds with VANGUARD - and their fees are ONLY .18% - and no hidden 12b1 fees. So, we will literally save tens of thousands of dollars (in fees) over the long haul - depending on market conditions obviously...

I really had no idea the extent that we were being fleeced - till I started doing much more research.

I spent quite a bit of time with the nice folks at Vanguard on the phone (several hours) - and they have "fee calculators" - and crunched some numbers for me.... forgot exactly how he worded it but basically - with either current or avg market conditions - those high fees that people are paying to invest with the BIG NAME companies (like Franklin Templeton & Invesco - and all the others that charge over 1% on avg in fees)... Vanguard crunched the numbers and told me that a $100k investment over 20 years with industry avg fees of over 1% - we WOULD LOSE about $55k in FEES - slowly skimmed off the top over the course of 20 years.

So, anyway, we are thrilled so far with Vanguard - and feel a huge weight off our shoulders - not having to pay such high fees. Plus, the Vanguard funds we chose (VFORX) are pretty heavily diversified... and are similar to the 2040 L Fund where they get more conservative as you approach retirement age. With us not all that savvy with investments, we felt it might be a good idea to let Vanguard handle making our investments more conservative as we got closer to retirement - and if at some point we find better funds - we will xfer to them instead (w/out penalty).

Anyway... felt good to get that off my chest - thanks for listening and hope I wasn't off topic.

[alevin]

A 0/0/30/50/20 allocation results in:
Expected Annual Return: 8% (11% before a 3% inflation chop)
Expected Annual Risk (Variance): 12%
That means that 2/3rds of the time you will land between -1% and 23% investment growth before inflation.

The 'C Fund' is:
Expected Annual Return: 7% (10% before a 3% inflation chop)
Expected Annual Risk (Variance): 16%
That means that 2/3rds of the time you will land between -3% and 26% investment growth before inflation.

The 'S Fund' is:
Expected Annual Return: 8% (11% before a 3% inflation chop)
Expected Annual Risk (Variance): 20%
That means that 2/3rds of the time you will land between -9% and 31% investment growth before inflation.

The 'I Fund' is:
Expected Annual Return: 8% (11% before a 3% inflation chop)
Expected Annual Risk (Variance): 18%
That means that 2/3rds of the time you will land between -7% and 29% investment growth before inflation.

*Numbers from Quicken's Investment Asset Allocation tool

So, you will be over-weighting in the highest risk fund - and the one that boomed this year. That is generally called chasing returns. A two standard deviation variance to the negative in the 'S Fund' will result in a -29% return on that part of your allocation. Personally, I would watch for the correction in the 'F Fund' (not invest there yet, but be ready) and over-weight the 'I Fund' which has been a bit of a laggard. Maybe a 0/0/30/20/50 split - which in a normal market should result in a 10%/11% pre-inflation Annual Return/Risk ratio. About what your allocation is, but kinda doing a bit of market timing and reducing risk in a bubbly fund. Also, it would not be stupid to have a decent chunk in the 'G Fund' - maybe 20% to 25% - to purchase more in a fund that pops. But, like you that thought has lost me money this year.

I would strongly recommend Ric Edelman's 'The Lies About Money' for setting an allocation. There is science involved. This ain't pure gamblin' and it ain't pure guesswork. And, a 13% return while holding risk at bay during a year of confusion ain't too bad. Those 'S Fund' holders could have just as easily been banging on the bottom with -20% returns as sitting on the top with +38% returns. The expected returns are about the same. All those chaps may have peed in the water a bit upstream - but all that stuff is already under our bridge by now, eh:p.

Anyway, your call.

This is the clearest explication I'v seen from you of your risk calculations for each individual fund and how the variances influence your allocation decisions. I get it-finally. I've been too stuck on the black swans flying in the stratosphere that haven't come back down to earth yet. they're still out there, but have decided I've spent too much time looking up for falling skies, not enough time spent looking at what's under my nose. It's a new year next week, planning on changing things up a bit. still a lot risk averse, but admit I need to take some intermittent risks nonetheless. did some retirement income calcs the other day, if I don't get on the stick, and off the dime, won't be able to call it quits at MRA+30, or for a few years after that either. maxed out tsp contribs plus maxed out Roth won't cut it if the money doesn't grow along the way at least enough to exceed inflation.

[coastalite]

A 0/0/30/50/20 allocation results in:
Expected Annual Return: 8% (11% before a 3% inflation chop)
Expected Annual Risk (Variance): 12%
That means that 2/3rds of the time you will land between -1% and 23% investment growth before inflation.

The 'C Fund' is:
Expected Annual Return: 7% (10% before a 3% inflation chop)
Expected Annual Risk (Variance): 16%
That means that 2/3rds of the time you will land between -3% and 26% investment growth before inflation.

The 'S Fund' is:
Expected Annual Return: 8% (11% before a 3% inflation chop)
Expected Annual Risk (Variance): 20%
That means that 2/3rds of the time you will land between -9% and 31% investment growth before inflation.

The 'I Fund' is:
Expected Annual Return: 8% (11% before a 3% inflation chop)
Expected Annual Risk (Variance): 18%
That means that 2/3rds of the time you will land between -7% and 29% investment growth before inflation.

*Numbers from Quicken's Investment Asset Allocation tool

So, you will be over-weighting in the highest risk fund - and the one that boomed this year. That is generally called chasing returns. A two standard deviation variance to the negative in the 'S Fund' will result in a -29% return on that part of your allocation. Personally, I would watch for the correction in the 'F Fund' (not invest there yet, but be ready) and over-weight the 'I Fund' which has been a bit of a laggard. Maybe a 0/0/30/20/50 split - which in a normal market should result in a 10%/11% pre-inflation Annual Return/Risk ratio. About what your allocation is, but kinda doing a bit of market timing and reducing risk in a bubbly fund. Also, it would not be stupid to have a decent chunk in the 'G Fund' - maybe 20% to 25% - to purchase more in a fund that pops. But, like you that thought has lost me money this year.

I would strongly recommend Ric Edelman's 'The Lies About Money' for setting an allocation. There is science involved. This ain't pure gamblin' and it ain't pure guesswork. And, a 13% return while holding risk at bay during a year of confusion ain't too bad. Those 'S Fund' holders could have just as easily been banging on the bottom with -20% returns as sitting on the top with +38% returns. The expected returns are about the same. All those chaps may have peed in the water a bit upstream - but all that stuff is already under our bridge by now, eh:p.

Anyway, your call.


Well that stinks... I was logged in and just typed a reply - and then somehow I wasn't logged in - so I lost my reply. That will teach me to ctrl c from now on before posting. F&%K!


Oh well. To make a long story short: before the noon deadline - I decided to change it up a little and go 30C/60S/10I.

Rolling the dice but staying in the game. Spent too much time screwing around on the sidelines in G and missed some rallies...

So, I am done playing around and am going to stop succumbing to fear and stay in it to win it.

On the other hand, for someone like me - the L2040 fund doesn't look too bad. I'm just not savvy enough at investing to be moving in and out of funds, changing allocations, and generally trying to time the markets.

I need to find an allocation and stick with it, or just let it ride in L2040 and let the fund do the work of reallocating as I get closer to retirement.

Any thoughts?

[Pill]

Yes, buy and hold works, DCA, stay in to win no matter how close you are to retirement. Market sinks, you throw more money at it. My humble opinion.

[nasa1974]

coastalite, the one thing you want to do is try to invest as much as you can afford into your TSP account every month.

[coastalite]

coastalite, the one thing you want to do is try to invest as much as you can afford into your TSP account every month.

Yeppers, the plan indeed is to invest as much as we possibly can into our TSP account each year.

The spouse & I each also have a ROTH IRA (w/Vanguard) - along with $50k in an old 401k that was rolled over from an old employer plan into a traditional IRA (also w/Vanguard). Not quite sure yet what to do with the traditional IRA. Do we just let it sit by itself - or do we slowly convert it into the ROTH (or maybe all at once). Any thoughts?

We're just not sure if it makes financial sense to convert it into our ROTH. My guess is that we'd need to sit down with a CPA - or do some research and figure out on our own if it's worth converting - or if we should just leave it alone.

[Bullitt]

Some good replies in here so I can't add much more. Worst thing you can do is mess with your allocation more than maybe twice a year. A good time to rebalance lies ahead.

I'm 34 and go 65 stocks 35 bonds/cash in TSP. Not what a wall street broker who gets paid by commission would call an aggressive portfolio, but my gain is his loss.

Keep saving and contributing, it's the only thing you have any control over. 20 years is a long way to go so if you keep increasing the savings rate every time we get a 1% raise, you'll be fine. Just make sure you have a good rainy day fund to go with.

[coastalite]

Some good replies in here so I can't add much more. Worst thing you can do is mess with your allocation more than maybe twice a year. A good time to rebalance lies ahead.

I'm 34 and go 65 stocks 35 bonds/cash in TSP. Not what a wall street broker who gets paid by commission would call an aggressive portfolio, but my gain is his loss.

Keep saving and contributing, it's the only thing you have any control over. 20 years is a long way to go so if you keep increasing the savings rate every time we get a 1% raise, you'll be fine. Just make sure you have a good rainy day fund to go with.



I'm curious, why is messing with your allocation more than a couple times a year - the "worst thing you can do"? It seems like a lot of folks on the Autotracker routinely have 1 or 2 IFT's each month. The guy leading the tracker at +3.70% for the year I think has already made 3 IFT's for YTD.

Also, I was watching a recent "MSN.com" retirement investment strategy video - and the talking head in the video said that (and I'm paraphrasing) - a good way to decide what your retirement allocation should be is to subtract your age from 100 to figure out what % you should be in stocks/cash/bonds.

For example, if you are age 40, then: 100-40=60% stocks w/the remaining 40% to cash/bonds. I think the video said 50/50 cash/bonds - so for the TSP - For someone age 40, it would be: 60% (allocated as you see fit into C/S/I) and the remaining 40% (allocated to 20G/20F). Frankly, I don't think the MSN.com video is bad advice. It seems sensible. However, if you are 65 - I doubt you're going to want to be 35% stocks.

All of the L Funds eventually end up as the L Income Fund - which is allocated 80% Cash/Bonds (72G/8F) & 20% Stocks (12C/3S/5I).

As I understand the L Funds (and not just the TSP target date funds - but other target date funds out there too); the rationale is that they're not designed to JUST get you TO retirement, but rather, they're designed to try to get you THROUGH retirement as well (hence the 80% cash/bonds & 20% stocks allocation). If you're retired and taking distributions while in 100% G - then you're not only depleting your nest egg - but you're also getting beaten down by inflation and not allowing at least SOME of that nest egg to try to work for you.

So anyway, I'm considering the possibility of going w/the L2030 Fund - and just leave it alone - since I'm not a good enough investor to try to time the market. For Jan 2014 - the L2030 Fund it is allocated at 66.5% stocks and 33.5% (G&F). Not sure, but isn't that allocation similar to yours, Bullitt?

Speaking of the L Funds, does anyone have any other insights or thoughts on the L Funds - & also - why aren't they more popular? It seems they are perfect for either the lazy or inexperienced investor - because they do all the work for you and get more conservative as you get closer to retirement: they do all the rebalancing and reallocating for you. So, what's the drawback? Is it the way they have them allocated? Not enough weight given to the S Fund? Too much weight given to the C and/or I Fund? Just curious what others think???

[Birchtree]

I'm 100% stocks and then some with margin and plan to stay that way through my retirement years collecting a nice income stream. If I need more money I can always harvest some capital gains - you have to take taxes into consideration - and capital gains are tax protected. Stocks will throw off cash - last year I had 158 dividend increase announcements and fully expect the same for 2014 if not even more. This cash currently is reinvested and is like a cola. The principal will fluctuate with market gyrations but the income stream usually remains constant and grows with economic growth. When the time is right roll your TSP account into a traditional IRA for more flexibility and income stream. Later on do a conversion roll over from IRA into a Roth IRA for tax free income. But as always try to learn before you churn. Keep your AGI as low as possible and keep the dems out of your pockets.

[Bullitt]

The L Funds probably don't seem popular because it's a set it and forget it investment. You dump your money there and call it a day. I'd say 95% on the MB plan on beating the averages over time despite the statistics being strongly against their favor. Plus, most won't admit it but when they had 20 years left they weren't saving, they were buying pickup trucks and houses so now they need to make up their deficit with mind blowing returns.

Your L2030 allocation may be similar to mine now, but not in a few years. I plan on riding 65/35 into the sunset.

As to tinkering with the portfolio, that means making a change such as going from 65/35 to 60/40. That would be a change. You'll see many going 100% G to 100% C twice a month or messing with the I Fund fair value to gain a penny. Some must have the time and are willing to try to do what is nearly impossible; that is beat the market over time.

In the end, everyone has to choose their own path. Read a few books by Bernstein, Swedroe, Ferri, Siegel, Swenson, or Jonathan Clements and you'll know all you need plus you'll have time to enjoy life. You really don't have much control over your return. Control the things you can- for one being your savings rate and two your asset allocation. Oh and don't forget to save for a rainy day.

[Cactus]

Coastalite, if you don't want to leave your IRA by itself or convert it to a ROTH, you may want to look into rolling it into your TSP. I think it is TSP Form 60 for that.

As for the L Fund. The thing I don't like about it is the daily rebalancing. Seems to me that financial advisers used to tell us not to rebalance more than once a quarter. All I know is I got burned bad when I tried it in 2008 and that left a bad taste in my mouth. The daily rebalancing works great with typical up-N-down market movemnts. As things get more extreme though, you are pulling more money off of that rocket daily in rally years like 2013 and throwing good money after bad as it drops into a hole like 2008.

Like I said, that's just me and I'm biased so take it for that. I think the L Funds are designed for folks who never look at their funds and expect it to be there when they retire. If you check funds once or twice a year you can always manually set your allocation to the L Fund of your choice and rebalance them yourself whenever you check in.

[coastalite]

Coastalite, if you don't want to leave your IRA by itself or convert it to a ROTH, you may want to look into rolling it into your TSP. I think it is TSP Form 60 for that.

As for the L Fund. The thing I don't like about it is the daily rebalancing. Seems to me that financial advisers used to tell us not to rebalance more than once a quarter. All I know is I got burned bad when I tried it in 2008 and that left a bad taste in my mouth. The daily rebalancing works great with typical up-N-down market movemnts. As things get more extreme though, you are pulling more money off of that rocket daily in rally years like 2013 and throwing good money after bad as it drops into a hole like 2008.


Thanks, after a lot of hemming and hawing, I decided not to "set it and forget it" in either of the L2030 or L2040 funds. I didn't realize they rebalance daily. I thought it was only once per qtr, but I had it confused that they reallocate once per qtr...

so.. anyway for now I'm going to try to stick with 47C/33S/20I and stay there (unless we can somehow see a clear indication that a crash is coming) - in which case I would put everything in G but leave the contributions going into C/S/I to snap up shares at lower prices... However, who knows if "G" is really safe, when you have Lew saying (http://www.marketwatch.com/story/us-to-suspend-pension-retirement-funding-lew-2014-02-10-1591162) they can and have in the past, suspended pension and retirement funding to avoid the debt ceiling... blah blah blah.

Has anyone been following this chart below? They (http://www.marketwatch.com/story/scary-1929-market-chart-gains-traction-2014-02-11) are saying the Dow is right now looking like the charts looked in 1928/1929. Scary indeed. More fear mongering?


http://beforeitsnews.com/contributor/upload/5385/images/Screenshot%20from%202014-02-12%2009_06_13.jpg

[coastalite]

When the time is right roll your TSP account into a traditional IRA for more flexibility and income stream. Later on do a conversion roll over from IRA into a Roth IRA for tax free income.

Hmmm, this may be a dumb question, but I thought the "G Fund" is guaranteed by the govt, and if it is, then why would a retiree want to risk rolling their nest egg from the safety of the TSP's G Fund - over to what could be considered an unknown risk in either a Traditional or converted ROTH IRA (which neither are guaranteed or FDIC insured)?

I thought that after you retire... most would probably want to keep their TSP intact and allocated to G (guaranteed cash distribution w/no risk plus LOW FEES) and a smaller % allocated into stocks - to try to beat inflation - & perhaps allow for some growth - possibly enough to help get you THROUGH retirement.

What is the advantage of converting your TSP to an IRA and then convert to a ROTH, and when is the right time to do that? Also, wouldn't we get a double whammy on taxes if we converted to a ROTH? Or, would you slowly convert a portion of it each year based on your AGI and whatever is most advantageous from a tax standpoint?

[Birchtree]

The advantage of a traditional IRA is the option of flexibility to invest or trade without a schedule D paperwork. Converting to a Roth IRA slowly keeps the tax payments lower and then there are no taxes on the gains. Both TSP and IRA have required minimum distributions that you can't control. The objective is to control your AGI and keep what is yours. Keeping money in the G fund during retirement is 1980s thinking - now you need to keep your assets working even during retirement. Everyone is going to become market oriented over the next several decades just to survive. Can you imagine the demand that will create - just look at the growth of this TSP board during the last several years. Once you establish an income stream you've got sustainability and security - let the capital gains flow in and out and selectively harvest a few gains for the grandkids. There is no RMD for an heir with an inherited Roth IRA. I like the fact that a growth oriented Roth with stocks can live in perpituity and a lot longer than me.

[coastalite]

Update: It's now mid to late 40's with about 15 years till retirement.

Current allocation/distribution of funds - as of today's IFT is:
20 G
50 C
10 S
20 I

Current contributions:
60 C
20 S
20 I

We are contributing the maximum allowable to the TSP (IRA - married filing jointly) of $18,000 for 2015.

My spouse & I are each maxing out our ROTH IRA's at Vanguard for 2015 at $5,500 each.

Total 2015 retirement contributions = $18,000 + $5,500 + $5,500 = $29,000.

Any thoughts/comments/suggestions for our long-term strategy/approach are certainly encouraged and welcomed!!!

Thank you!

[FogSailing]

Just wanted to complement the electric guitar on your logo. Is that a Vintage Fender Strat by chance?

Your long term strategy looks sound to me but I'm somewhat conservative in my trading. I think you are doing the right stuff. Answering that question " What are my long term financial goals is critical. Then creating the strategy to get you there has real power. Like any plan, expect lots of changes and adjustments. There are many successful traders on this forum that have expanded their horizons beyond the TSP with excellent results. Hopefully a few of them can offer you their perspective. Best of luck to you. Fifteen years will fly by...believe me.

FS

[coastalite]

Just wanted to complement the electric guitar on your logo. Is that a Vintage Fender Strat by chance?

Your long term strategy looks sound to me but I'm somewhat conservative in my trading. I think you are doing the right stuff. Answering that question " What are my long term financial goals is critical. Then creating the strategy to get you there has real power. Like any plan, expect lots of changes and adjustments. There are many successful traders on this forum that have expanded their horizons beyond the TSP with excellent results. Hopefully a few of them can offer you their perspective. Best of luck to you. Fifteen years will fly by...believe me.

FS

Thanks, I wish. I'm still in kind of the advanced beginner stage - maybe approaching beginning intermediate??? It's about 2 to 2.5 years of practicing a few hours here & there... I know several chords but can't do any solo stuff... kinda struggling to understand how it all works below the first 3 or 4 frets... so I didn't want to spend a ton... so I decided on a 2013 Fender Deluxe Lone Star Strat (HSS) - MIM (kind of a vintage 70's look to it - but it has a fairly nice sound to it and build qlty for their mex factory). They sell for around $600 - but I talked them down to $500 and had a $100 free gift card - so I basically got a steal at $400 out-of-pocket (lol) - the guitar looks & feels like a more expensive guitar & of course I had to splurge on a pro Fender hard case for it.

As for investing - I guess if it was easy, everyone would be doing it.

We're not really all that savvy - so we're just going to try to accumulate as much as possible & then go conservative as we get closer. Beyond that, kinda play it by ear and try to learn as much as possible. Thanks!

[DrDetroit]

Update: It's now mid to late 40's with about 15 years till retirement.

Current allocation/distribution of funds - as of today's IFT is:
20 G
50 C
10 S
20 I

Current contributions:
60 C
20 S
20 I

We are contributing the maximum allowable to the TSP (IRA - married filing jointly) of $18,000 for 2015.

My spouse & I are each maxing out our ROTH IRA's at Vanguard for 2015 at $5,500 each.

Total 2015 retirement contributions = $18,000 + $5,500 + $5,500 = $29,000.

Any thoughts/comments/suggestions for our long-term strategy/approach are certainly encouraged and welcomed!!!

Thank you! I like it. I've read the thread from the beginning and you have evolved from an unsure investor, to a confident investor with a plan with some self-deprivation in the middle, lol.

I have a degree in Finance so I've always thought I should be ahead of the game, and in the dot com era, I thought I had it all figured out. Well I didn't, and probably still don't but I do follow the simple rules that always work. Dollar cost averaging, contribute as much as you can to retirement accounts, don't get emotional about market fluctuation, and have a plan.

I'm 44, and have 24 years of service with 12 as a GOV CIV. I started investing when I was 21, got a Roth the day it was released, I invested in the TSP the day it was made available to uniformed service members.

I went back and looked what I was doing early in my civilian career and I made some mistakes. I should have been contributing more (I was at 6 to 8% my first five years) and I probably should have been a little more aggressive (I had 25% in G and F combined for a a few years, because I got burned by the dot com bubble).

Right now I'm contributing the max and I have been in fairly aggressive allocations since 2007 or so. I'd say I'd averaged 85% in C/S/I since then, sometimes during that period I was closer to 90% stocks. I dialed it back this spring some and went 12% F and 8% G but my contributions are 100% stocks (45C, 35S, 20I). Every quarter I re-allocate regardless of market, and when the markets tank I stay far away from my account to avoid doing something stupid. I understand my risk tolerance and I think that's important for everyone. I you can't stand it and have to look at your account when the Dow is down 350, you need to put more in G IMO. This should not be a stressful endeavor, it should be rewarding and you have to stick to the plan.

Finally I will say that I don't like the lifecycle funds, at least for me. I recommend them to folks who just can't wrap their heads around investing, but I tell those people to go with the fund that is 10 years beyond their retirement date. I can retire in 2029 and the 2030 fund is 30%G, 5%F, 35%G, 10%S, and 20%I. That's too conservative IMO and I think the S and F funds are actually the two best funds for balancing your portfolio for age, risk tolerance, and goals. I won't be 35% in bonds until I'm 5 years away from retirement, and even in retirement I doubt I'll go below 50% stocks. U.S. markets are the best in the world and that's not changing in my lifetime, I'm not about to give away free money because I'm afraid to lose a few thousand dollars in the short-term (kiplingers for example recommends 55% stocks at retirement, 35% 10 years after retirement).
T
hat's my story, and I'm sticking to it. :laugh:

[DrDetroit]

I guess there is no real conversation in this forum, people seem to only come here to talk about daily strategies which is a dumb way to invest in TSP. $2.1 billion in outflows in the C, S, and I funds in June. All those people are suckers IMO.

[RazorCat]

I guess there is no real conversation in this forum, people seem to only come here to talk about daily strategies which is a dumb way to invest in TSP. $2.1 billion in outflows in the C, S, and I funds in June. All those people are suckers IMO.
There's plenty of discussions and direction on short term, and long term, investing on this site. You take what you want from it and move (or don't move) your money accordingly. If you're a Buy and Hold investor, then peruse the information in the various "account talk" threads or from a premium service, and use it as you see fit. There's dozens of different approaches and styles to investing on TSP. The only "suckers" are those that think other's advice, opinions, and investing strategies aren't valuable in an overall approach to investing.
Welcome to TSP.

[DrDetroit]

There's plenty of discussions and direction on short term, and long term, investing on this site. You take what you want from it and move (or don't move) your money accordingly. If you're a Buy and Hold investor, then peruse the information in the various "account talk" threads or from a premium service, and use it as you see fit. There's dozens of different approaches and styles to investing on TSP. The only "suckers" are those that think other's advice, opinions, and investing strategies aren't valuable in an overall approach to investing.
Welcome to TSP.
100% G Fund FTW

[Intrepid_Timer]

I guess there is no real conversation in this forum, people seem to only come here to talk about daily strategies which is a dumb way to invest in TSP. $2.1 billion in outflows in the C, S, and I funds in June. All those people are suckers IMO.

The only suckers here are the ones that come to a site that clearly states "friends don't let friends buy and hold" preaching to every one that should indeed buy and hold. All of a sudden now you say that you are 100% G. Does that make you a sucker like the one's that pulled their money out of C, S and I funds in June? I really don't understand..........................It's probably because I don't have a degree in finance, although what that has to do with investing or trading, I'm not quite sure.

[clester]

I guess there is no real conversation in this forum, people seem to only come here to talk about daily strategies which is a dumb way to invest in TSP. $2.1 billion in outflows in the C, S, and I funds in June. All those people are suckers IMO.
Unfortunately there is no daily strategy in TSP. The TSP board thinks we are too dumb to manage our funds daily. Its now much more complicated as we can only move into stocks 2 times a month now! :(

[evilanne]

Unfortunately there is no daily strategy in TSP. The TSP board thinks we are too dumb to manage our funds daily. Its now much more complicated as we can only move into stocks 2 times a month now! :(

I don't like the 2 IFT limitation. The limitation was initiated because a small group of people were making excessive number of trades, resulting in excessive trading costs for the TSP, especially the I Fund. see https://www.tsp.gov/PDF/bulletins/08-4.pdf

[burrocrat]

I don't like the 2 IFT limitation. The limitation was initiated because a small group of people were making excessive number of trades, resulting in excessive trading costs for the TSP, especially the I Fund. see https://www.tsp.gov/PDF/bulletins/08-4.pdf

i don't buy this explanation, because none of the tsp funds are actually traded on any stock exchange, they are not registered securities anywhere and when you or i make an ift it does not cause an individual trade for 'x' number of shares for 'y' dollars to be debited or credited to our accounts and there is no individual transaction to generate a fee.

instead, we all own proportional "shares" of one of five giant gov "funds" that are designed to track the indexes, and tsp.gov rebalances each of these accounts every trading day no matter what. for two reasons, think of it this way:

reason #1) for simplicity sake, let's say there are only five tsp participants and each is 100% in only one fund. maria is 100-g, deshawn is 100-f, neal is 100-c, naoki is 100-s, and bob is 100-i. let's say on monday morning before work neal and bob both watch squawk box on cnbc and think the world is going to end today and they want to minimize risk (nevermind that if the world ended today, it would not make one bit of difference which fund your money was in). so neal and bob each make an ift trade to protect their digital future money. none of the other 3 participants fall for the hogwash on the boob tube and they stand pat. neal is a nervous nellie and moves 50% to g-fund. bob is more practical and shares the risk among all funds at 20% each. what happens? well since there are not any registered securities name g- f- c- s- or i-funds to actually trade, nobody incurs any costs until the market close, by which time tsp.gov must rebalance every single fund to match the overall makeup of its portfolio to match the sum of individual participant holdings. g-fund must go to 170 to account for the 50 neal and 20 bob moved in, f-fund goes to 120 because of bob's 20, c-fund goes to 70 because neal bailed 50 but bob entered 20, s-fund goes to 120 because of bob again, and i-fund goes to 80. at the beginning of the day the entire tsp portfolio was 100-g, 100-f, 100-c, 100-s, and 100-i. at market close the entire tsp portfolio is now 170-g, 120-f, 70-c, 120-s, and 80-i. thanks a lot neal and bob. but it is not really neal and bob's fault, see reason #2 below.

reason #2) the lifecycle funds. each of five lifecycle funds hold a specific percentage of the underlying g- f- c- s- and i-funds. let's say tsp now has 10 participants and 5 of them are not the active investing type so they each pick a different lifecycle fund with a risk profile tailored to their age and expected retirement timeline. since markets do not have perfect symmetry, any and likely all of the 5 funds are going to finish the day at a different price than they started the day with. this changes the relative weight of each fund in a stagnant portfolio because as s-fund increases in value it now represents a different larger percentage of your account. the nature of the lifecycle funds is that they must maintain an exact percentage weighting of the dollar amount of any fund in them. so even if nobody trades in a given day, the lifecycle funds but must do a massive overall rebalance of each of the underlying g- f- c- s- and i-funds anyways. thanks lifecycle funds.

so who is to blame for all this? it is not rocket science. the brokerage house that tsp.gov contracts with to mirror the actual market with real securities trades securities because that is what brokerage houses do. and because of the 12:00 noon ift deadline they have a four hour lead on the market, they know the target at noon and have until the closing bell to hit it. easy peasy. tsp.gov of course needs a number of gs-15 and gs-13 executives to watch the brokerage house trade for them on behalf of the tsp participants. and as luck would have it, they all often go out to the same steakhouses and sip bourbon together and congratulate each other for "making" money.

so it is not neal and bob, nor the lifecycle funds, who are at fault. it is just the nature of this free digital maybe worth something in the future money game. but don't be fooled, the number of individual trades in any given day or month is not responsible for the 2 ift per month limit. that is a different story altogether.

[ravensfan]

Nice explanation burro! :D:D:D:D

[clester]

I don't like the 2 IFT limitation. The limitation was initiated because a small group of people were making excessive number of trades, resulting in excessive trading costs for the TSP, especially the I Fund. see https://www.tsp.gov/PDF/bulletins/08-4.pdf

It didn't increase costs at all. They just didn't want us trading. I think cost to tsp actually went up.

[evilanne]

It doesn't matter if you buy it or not, it is what happened.

Preamble. Under the Federal Employees’Retirement System Act of 1986, theThrift Savings Plan (TSP) was created tooffer passive long-term investmentsdesigned to improve the retirementsecurity of Federal employees. As aresult of analysis performed in 2007, itbecame clear that a small number ofTSP participants were pursuing ‘‘markettiming’’ active investment strategies inthe TSP. These activities were dilutingthe earnings of the long-term investors,and adversely affecting the ability ofTSP managers to replicate theperformance of selected indexes asrequired by law.
'
If you read the FRTIB's Final Rule in the Federal Register, they addressed all the public comments received in response to the proposed rule in detail see pp 9-17 https://www.tsp.gov/PDF/bulletins/08-4.pdf (http://www.tsptalk.com/mb/redirect-to/?redirect=https%3A%2F%2Fwww.tsp.gov%2FPDF%2Fbullet ins%2F08-4.pdf)

[burrocrat]

well if that preamble is correct, that tsp is a passive investment model and frequent trading increases costs for everyone, and we all have been limited to 2 passive ift's per month instead of unlimited trades for many years now, wouldn't one expect management fees to go down? the proof is in the pudding.

[DrDetroit]

The only suckers here are the ones that come to a site that clearly states "friends don't let friends buy and hold" preaching to every one that should indeed buy and hold. All of a sudden now you say that you are 100% G. Does that make you a sucker like the one's that pulled their money out of C, S and I funds in June? I really don't understand..........................It's probably because I don't have a degree in finance, although what that has to do with investing or trading, I'm not quite sure.
You don't understand sarcasm do you? If you want to get smarmy, I'll play along.

No reason to get all butthurt because I know the "Intrepid Timer" or any other system you think works doesn't, you don't need a degree in finance to know markets operate independent of irrationally flawed methodology. Plenty of Wall Street types lose their houses and boats every single day thinking they have come up with the perfect system, and the beat goes on.

[Warrenlm]

Ref the discussion and linked pdf on the two IFT limit....there's other threads and links around here I'm sure and my memory, both short and long at this point, is failing, but I remember the event being caused by EbbnFlow and his followers, and the broker's losses on the I Fund changes. I remember complicated calculations and discussions about the exact share price and how adjustments kept being made from what it ostensibly should be. I took it that bankers are in charge. :) Ok, I'll go back to sleep now.

[Intrepid_Timer]

You don't understand sarcasm do you? If you want to get smarmy, I'll play along.

No reason to get all butthurt because I know the "Intrepid Timer" or any other system you think works doesn't, you don't need a degree in finance to know markets operate independent of irrationally flawed methodology. Plenty of Wall Street types lose their houses and boats every single day thinking they have come up with the perfect system, and the beat goes on.

I get "butthurt" when I see deceit and straight out lies on a forum that I've been a member of since 2004. We don't need it or want it. Also, there have been lots of naysayers along the way, but I'm still here and still making money.....................

[DrDetroit]

I get "butthurt" when I see deceit and straight out lies on a forum that I've been a member of since 2004. We don't need it or want it. Also, there have been lots of naysayers along the way, but I'm still here and still making money.....................
Here is what I suggest. Just get rid of this forum and any others that even mention long-term investing in the TSP. Put key words in that alert you if any scoundrel that wants to buy and hold, send a pop up banner with your market-timing system that crashes the computer if they try to move off of it. The only sub forums should be Silver: the next Microsoft, Whole Life Insurance Annuity Strategies, and How to cheat your elderly family members with Reverse Mortgages.

[RazorCat]

I don't like the 2 IFT limitation. The limitation was initiated because a small group of people were making excessive number of trades, resulting in excessive trading costs for the TSP, especially the I Fund. see https://www.tsp.gov/PDF/bulletins/08-4.pdf
I have to come clean. I was one of those traders years back that got a letter in 2008 from TSP about excessive trading. I framed it to remind of how much money I made during the no-limit IFT days of TSP. There was a small group of investors (a few thousand of the 3.9 million at the time) that were moving in and out of stock funds every day or two, and doing quite well. Moving between I, S, F, and G several times a month. The costs of processing those trades had little or nothing to do with why the TSP Director set IFT limits. The letter stated:
Last year, it became clear that a few thousand of the 3.9 million TSP participants were making frequent IFT requests. Because this activity was clearly accelerating, and in light of its detrimental effect on fund performance and transaction costs, the Agency is implementing limits on IFTs effective May 1, 2008.
I'm no financial expert, but I never understood how the frequent trading of a few thousand traders impacted fund performance for the masses. "Nut up and go for it". Or don't. Your choice. And if it was adversely impacting transaction costs, then raise them. The amount of money I was making with unlimited IFTs far outweighed any increase in TSP administrative costs. Never did like Greg Long.
What little extra work we generated for the outdated TSP computers was starting to annoy them. They didn't want any "Day Traders" to create extra work. Imagine the possibilities if we had even 2-3 more trades a month.
It is what it is.

[tsptalk]

Here is what I suggest. Just get rid of this forum and any others that even mention long-term investing in the TSP. Put key words in that alert you if any scoundrel that wants to buy and hold, send a pop up banner with your market-timing system that crashes the computer if they try to move off of it. The only sub forums should be Silver: the next Microsoft, Whole Life Insurance Annuity Strategies, and How to cheat your elderly family members with Reverse Mortgages.
So, treat it, and them, like you are treating market timers? Got it.

[Intrepid_Timer]

Here is what I suggest. Just get rid of this forum and any others that even mention long-term investing in the TSP. Put key words in that alert you if any scoundrel that wants to buy and hold, send a pop up banner with your market-timing system that crashes the computer if they try to move off of it. The only sub forums should be Silver: the next Microsoft, Whole Life Insurance Annuity Strategies, and How to cheat your elderly family members with Reverse Mortgages.

You irked me when you called market timers suckers, not when you mentioned long-term investing. I guess that was okay though, but me calling you on it wasn't. Typical....................

[DrDetroit]

You irked me when you called market timers suckers, not when you mentioned long-term investing. I guess that was okay though, but me calling you on it wasn't. Typical....................

It's all good. I read a lot and this forum does have some decent information relative to the TSP, so I can learn a few things that make me a more astute investor. Not sure what is typical, I've posted in Bogleheads forums for years, it's usually a group effort to getting people where they need to go. As far as anyone thinking any particular strategy is better than the other, it's irrelevant. As long as people are contributing enough to get the TSP/private company match, they can put their 401k plan in Navy beans for all I care. It's your money, not mine.