PuckZilla,
The best benefit of your pension is that you will start receiving it upon retiring from the military. As Frixxxxx stated, retiring early (like 40 years old) is next to impossible via a 401(k) style package. However, the financial benefit of a well funded 401(k) retirement will dwarf the $2,000 pension. Your pension will be play money.
However, to get there you have to take a reasonable amount of risk. And, I cannot determine your sleepy time risk aversion. I would probably talk to a real financial adviser, but maybe I'll play one on this thread.
- You are somewhere around 36 years old - thus, you have at least 24 years till you can pull money from your TSP 401(k)
- You are investing 875/month, thus about $10,500/year
- You have about $45,500 in TSP assets
- You lost 1.3% of your assets in the 5.5% 'correction' we just went through after the election.
- This tells me you only have about 20% of your assets in the equities funds (C/S/I) - something probable based on the contribution/allocation question.
Unless you are market timing - which takes tons of experience and skill - or you are extremely risk adverse - which may be true - this allocation is extremely conservative. My guess is that your average annual return is 3%. At that rate you are basically keeping up with inflation. Your account will be worth about $700,000 at age 65 and provide you with about $13K till age 85 (we will use that age simply because Quicken defaults to it as age of death). This allocation is almost a savings account.
I would strongly recommend almost the opposite allocation. Have 20% - 40% in G/F and the rest in C/S/I. You can slide to the smaller allocation in G/F because of both your age and the fact that you will have a solid pension. A 20% G,F / 80% C,S,I mix will result in an annual return of about 8%. Your account will be worth about $1.5 Million at age 65 and provide you with about $48K till age 85. All numbers are inflation adjusted.
In my opinion I would use an IFT to get into the L2040 or move to an allocation with about 20% in the G/F. Had you done so in October 2007 - at the top of the market and thus the worst time to be in equities - and kept investing 22% your account would be higher than it is right now. Probably significantly. I know that sounds weird, but think of all the cheap shares of C/S/I you would have bought and added to your share balance and you can see why. As long as you don't get scared and sell at the bottom.
Maybe start using an IFT each month to move 10% more into C/S/I till you meet your sleeping point.
By the way, at your age Dave Ramsey would have you 100% in the 'C Fund' and just leave it at that.
Bookmarks