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

  1. #13

    Join Date
    Mar 2006
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    Raleigh, NC
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    Default Re: TSP strategy for mid 40's with 20 years till retirement. Anyone? Bueller?

    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.
    Lookin' up at the 'G Fund'!!!

  2.  
  3. #14

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

    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?

  4.  
  5. #15

    Join Date
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    Default Re: TSP strategy for mid 40's with 20 years till retirement. Anyone? Bueller?

    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).

    Quote Originally Posted by coastalite View Post
    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?
    Lookin' up at the 'G Fund'!!!

  6.  
  7. #16

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

    Quote Originally Posted by Boghie View Post
    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.

  8.  
  9. #17

    Join Date
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    Smile Re: TSP strategy for mid 40's with 20 years till retirement. Anyone? Bueller?

    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...
    Lookin' up at the 'G Fund'!!!

  10.  
  11. #18

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

    Quote Originally Posted by Boghie View Post
    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


  12.  
  13. #19

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

    Quote Originally Posted by Boghie View Post
    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.


    Quote Originally Posted by Boghie View Post
    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.

    Quote Originally Posted by Boghie View Post
    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?

  14.  
  15. #20

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

    Quote Originally Posted by Kaufmanrider View Post
    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.

  16.  
  17. #21

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

    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). I don't want you fighting the other inmates in some White Collar Club Med Slammer because of some advise I proffer
    Lookin' up at the 'G Fund'!!!

  18.  
  19. #22

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

    Quote Originally Posted by Boghie View Post
    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" and their military advisory board? 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.
    Last edited by coastalite; 12-20-2011 at 12:29 PM.

  20.  
  21. #23

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

    Quote Originally Posted by Boghie View Post
    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.

  22.  
  23. #24

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

    Quote Originally Posted by alevin View Post
    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.

  24.  
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