Thread: ocean's Account Talk

Welcome Ocean, you must be one of these people:

TSP life-cycle investors won't let go of other funds

By Karen Rutzick
krutzick@govexec.com

Many investors in the Thrift Savings Plan's life-cycle funds are tempering their effectiveness by continuing to invest in traditional stand-alone funds too, officials said at a board meeting Monday.

The 401(k)-style retirement savings plan for federal employees began offering life-cycle funds in August. The funds automatically move from a more aggressive to a more conservative mix of investments as participants approach their target retirement dates.

But TSP officials said they are finding that 55 percent of participants still have money in at least one of the five stand-alone funds too. The life-cycle funds were designed to hold the entire balance.

The most striking number may be this: 16 percent of life-cycle investors also have money in all five of the TSP's stand-alone funds. Those funds are the government securities (G) fund, fixed-income securities (F) fund, common stocks (C) fund, international stocks (I) fund and the small- and mid-sized companies (S) fund.

Six percent of life-cycle participants also have money in four stand-alone funds, 11 percent have money in three, 9 percent have money in two and 13 percent also have money in one additional fund.

One of the primary reasons TSP officials developed the life-cycle option was to wean participants from their overdependence on the G fund. That fund has no risk because its returns are guaranteed by the government, but it also doesn't offer an opportunity for the high returns that are important to funding a comfortable retirement.

Participants still seem attached. Of investors with one stand-alone fund in addition to the life-cycle option, 74 percent were in the G fund.

That instinct is understandable, said Andrew Saul, chairman of the TSP board.

"[The G fund] is such a great investment, let's be honest," Saul said. "It gives you such a great rate at no risk at all. So you'll always have more investors in the money market than you would in other plans."

There is another reason the G fund may still be popular, said Gary Amelio, executive director of the TSP. For new participants, the first month's assets go directly into the G fund regardless of fund selection. Participants might unknowingly be keeping one month's investments in that fund.

TSP officials said they will consider sending targeted educational mailings to investors who are using the life-cycle funds improperly.

The good news is that 95 percent of life-cycle investors are putting their money into just one of the five life-cycle options, as intended. The TSP offers distinct life-cycle funds for federal employees planning retirement around the year 2040, 2030, 2020, 2010 or in the next few years. Employees are meant to choose the one that most closely matches their target retirement date.

Participation in the life-cycle funds has been very strong. To date, about 214,000 investors have poured $7.3 billion into the funds. In less than five months, those figures already have surpassed the TSP board's goal for the first year.



Please don't expect to be tracked by me. But good luck with that. :^

M_M

Thank goodness those 214,000 participants are in the Lifecycle funds and happy to be where they find themselves. Otherwise, they could be headed this way and then what does one do? Already Tom is contemplating consolidating with another group - then wait for .... well hurry up and wait.

Birchtree wrote:

Already Tom is contemplating consolidating with another group - then wait for .... well hurry up and wait.

It's not another TSP site. It a gov't benefits site but nothing is set in stone yet.

By the way, welcome ocean! I'm going to change the name of this thread to "Ocean's Account Talk", if you don't mind. It will go better in this forum.

Thanks,
Tom

Please do that Tom and I don't mind.

BTW, the rules on the "Member allocations, Transactions, and Returns" stated that the Returns to be posted. TSPTalk posts his Returns when he re-allocates his position. It will be nice to have all members to post their year-to-date returns when they change their allocation so we can all learn it from each other.

Best Regards,

Ocean

mlk_man is now taking care of the tally. I don't know if it will posted , or just emailed out. Here is the latest thread...

http://www.tsptalk.com/mb/forum21/2439.html

Ocean, I hope my previous post didn't come across as rude, that was not my intention. It's just that by being a percentage in one L fund, a percentage in another L fund, and putting another percentage in the various funds of your choosing, it's just going to be way too difficult to track on the tracker that we have. If you can break it down and let us know what your exact percentages are in each fund, then I'd be able to track you.

Fundsurfer posts a "tally" results for each poster at the end of each month. Usually the first or second week of the following month. I send out the tracker weekly via e-mail so if you would like to be included on thelist just shoot me your e-mail address. Otherwise the results will be posted here in a couple weeks.

Good luck to you,

M_M

mlk_man,

Thanks for your reply andI don't interpret that way so please don't worry about it.I chose the mixed ofeverything is my way of hedging when I'm not sure the direction of the market and I don't want to miss out on the up side. This is kind of taking a little bite one at a time. Because my TSP funds become somewhat sizable with my maximum amount contributioninmy account since 1988, I am happy with the smaller steps now.

I change my "mixed" position frequentlyso it is difficult for me to track the percentage of the breakdown on the L funds. Also I may not able follow my entry of record on the message board promptly because I'm on business trip quite often. So for now, there is no need to track my record. I will post myYTD returns on the board in the beginning of each month.

I do appreciate your effort of tracking members' record and I know this is not an easy task. When TSPtalk site became more popular and I wonder how you can contiune to do that while keeping your day time job. When you get to that point, I think the site is even more successful then. Meanwhile, keep up with the good work.

BTW, my YTD returns is 8.3% (previous stated 7.5% was incorrect)

Ocean

Ocean,

Welcome to the power account club. I put my information out there to demonstrate that one can continue to build an account quicker when you have more money on the line. You will encounter much noise regarding a risk profile - and I will tell you that investing doesn't come any safer than TSP - the risk is minimal - that's why I try and leverage my power account in a concentrated position. I don't need diversification, I want concentration of my asset base - to include 100% contribution allocations to dollar cost average. The C fund continues to be cheap but will not stay that way. I want to acquire as many shares as possible while the price is still below`$15. Take care.
Dennis

Unfortionately the C fund could stay over sold for awhile! I'd wait to see some strength before getting back in.

FuzzDuzz,

The C fund is not oversold, but rather undervalued in comparison to the other available funds - and we can be certain about one thing in investing and that is it will eventually change. I'm accumulating as many shares as possible while the pricing remains tolerable - I've been early in the C fund and have gotten a couple of years worth of solid buys. With 32,000 shares I'm primed. Can you see the potential when the market finally decides that large caps are the new boys in town. Until then patients is virtuous - and dollar cost averaging is sweet over time. Take care.

Dennis

What if we go down for the next two years like we did march 2000???? You may have a ton of shares by then but they won't be worth very much!!!