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Thread: Recommended allocations after retirement

  1. #1

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    Default Recommended allocations after retirement

    For those who are retired and withdrawing funds from their account (because they need to), what percent do you recommend remain in either C, S or I? Do you stash it all in G for safety or do you put some in stocks hoping for a profit?

    Now that I'm retired and not making contributions, I seem to fear the losses more. Conversely, I feel like I'm missing out at 100% G. Thanks.

    Mo


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  3. #2

    Default Re: Recommended allocations after retirement

    Many feel that you should allocate in such a fashion so as to be able to accrue gains to offset some or all of the amount you withdraw. While this is a different amount relative to the needs of each individual, a popular suggestion is to expect to maintain a 4% rate as equilibrium. I will likely expect somewhat more than that, but plan to manage my TSP account agressively.

    It will depend on what you have, what you need and how long you expect to live.

    Best of fortune... and congratulations on your retirement!

    Quote Originally Posted by MohammadXX View Post
    For those who are retired and withdrawing funds from their account (because they need to), what percent do you recommend remain in either C, S or I? Do you stash it all in G for safety or do you put some in stocks hoping for a profit?

    Now that I'm retired and not making contributions, I seem to fear the losses more. Conversely, I feel like I'm missing out at 100% G. Thanks.

    Mo
    Official Retirement Date: 06-31-2014!

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  5. #3

    Default Re: Recommended allocations after retirement

    Quote Originally Posted by MohammadXX View Post
    For those who are retired and withdrawing funds from their account (because they need to), what percent do you recommend remain in either C, S or I? Do you stash it all in G for safety or do you put some in stocks hoping for a profit?Mo
    Welcome back.

    Usually the concerns/trade offs are:
    1. How much you need to withdraw each year.
    2. Your starting balance.
    3. Whether or not you're worried about running out of money.

    The withdrawal rule of thumb is 4% a year. Of course you'll probably need to take on a little risk, i.e. C/S/I, to stay ahead of inflation.

    You can run some Monte Carlo simulations at this site.
    http://www.firecalc.com/firecalc.php
    The simulations compute the probability that your withdrawal/portfolio plan will succeed. Of course, nothing is guaranteed.

    In terms of C/S/I a good place to start would be C=55%; S=15%; I=30% balanced by enough G/F to get the level of risk you feel comfortable with.

    For example a 50/50 portfolio could look like G=25%;F=25%;C=28%;S=7%;I=15%. Using historical data that portfolio would gave an 8.72% return with a 8.17% standard deviation. If inflation averages its historical rate of 3.5%, you withdraw 4%, and you actually get the average 8.72%, you won't run out of money.

    At lot of assumptions, but what can you do?

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  7. #4

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    Smile Re: Recommended allocations after retirement

    Quote Originally Posted by MohammadXX View Post
    Now that I'm retired and not making contributions, I seem to fear the losses more. Conversely, I feel like I'm missing out at 100% G. Thanks........Mo
    Mo,
    That feeling will pass in a few months. Similiar to "deer in headlights"...
    SkyPilot and rokid have good advice.
    But, you might want to stay safe in G or L-Income till you get your land legs back.....
    We are getting more retired folks here ever week!
    Welcome to the club!
    Spaf

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  9. #5

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    Default Re: Recommended allocations after retirement

    Mo,

    Make no mistake you are in a dangerous game and without the benefit of DCA contributions the danger level is elevated. Concentrate your energy on being on the right side of the curve - we are still in a bull market. That is most important. I wouldn't bother with a diversified plan but concentrate my funds in the sector that is most undervalued - that currently is the C fund. You have the opportunity to really expand your balance over the next three years whether you do a buy and hold or trade the position volatility. Don't bunny hop everytime the weather changes - you will loose money because you no longer have the redeemer of DCA on your side. If you are now in the G fund you can gently DCA in on the way up locking profits in behind you.

    Dennis

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  11. #6

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    Default Re: Recommended allocations after retirement

    Thanks to all for your insightful replies.

    While under CSRS, my TSP account sometimes seemed like monopoly money. Now its more serious and preservation is a real concern.
    Presently, I'm 50% G. The other 50% in equities. I don't transfer very often, but I do watch closely.
    Mo

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  13. #7

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    Default Re: Recommended allocations after retirement

    The L-Income fund is set up for very low risk, compared to full stock funds, and does seem to do better than the G fund alone. It's 74% "G", 6% "F", and the balance in stocks.

    Being 50/50 in G and stocks is a little risky- but if yo are comfortable with that split, more power to you!

    L funds might be a nice place to sit while you think about where you want to be later.

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  15. #8

    Default Re: Recommended allocations after retirement

    Quote Originally Posted by MohammadXX View Post
    For those who are retired and withdrawing funds from their account (because they need to), what percent do you recommend remain in either C, S or I? Do you stash it all in G for safety or do you put some in stocks hoping for a profit?

    Now that I'm retired and not making contributions, I seem to fear the losses more. Conversely, I feel like I'm missing out at 100% G. Thanks.

    Mo
    Do a google search for the "Monte Carlo Simulation" model which may help you determine the right mix of assets from which to withdraw during retirement.

    Ed

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  17. #9

    Default Re: Recommended allocations after retirement

    Quote Originally Posted by MohammadXX View Post
    For those who are retired and withdrawing funds from their account (because they need to), what percent do you recommend remain in either C, S or I? Do you stash it all in G for safety or do you put some in stocks hoping for a profit?

    Now that I'm retired and not making contributions, I seem to fear the losses more. Conversely, I feel like I'm missing out at 100% G. Thanks.

    Mo
    Google "Monte Carlo Simulation" model which may help determine the asset mix. The financial community seems to generally agree the percentage to draw down retirement assests should be no more than 4% if you want to outlive your assets.

    Ed


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  19. #10

    Default Re: Recommended allocations after retirement

    I'd probably go 20%I, 10%C, 10%S, 50%F, and 10%G, if all i had to use was TSP.

    >Going much lower on stock holdings will primarly just hurt your return more, but wont really lower risk that much more.
    >Bonds are going to give you about a percent more than G fund over the long term, and have more indirect correlation with stocks reducing volatility
    >Buying too much US stock can be thought of as patriotic, but its a little short sighted given its just one country in the world. IMO, at least 50% of one's stock portion should be outside the US, whether retired or not. Even at the 50% level you can boast how much you like US stock because at least half of ALL your stock holdings are just in the US.
    >If preservation of capital and return are both given equal weight, someone has their work cut out for them to beat my suggested portfolio for a retiree.
    >TSP needs a foreign bond fund IMO worse than anything else. Followed by a junk bond/convertables/preferred stock fund or maybe an REIT fund.

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  21. #11

    Default Re: Recommended allocations after retirement

    Quote Originally Posted by MohammadXX View Post
    For those who are retired and withdrawing funds from their account (because they need to), what percent do you recommend remain in either C, S or I? Do you stash it all in G for safety or do you put some in stocks hoping for a profit?

    Now that I'm retired and not making contributions, I seem to fear the losses more. Conversely, I feel like I'm missing out at 100% G. Thanks.

    Mo
    Here's is one suggestion.



    Portfolio E

    Stocks
    60%
    38% Large Cap Stocks, or C Fund
    12% Small Cap Stocks, or S Fund
    10% International Stocks, or I Fund

    Bonds
    30%
    20% Investment Grade Bonds, or F Fund
    6% High Yield Bonds, or F Fund
    4% International Bonds, or F Fund

    Short-Term
    Securities
    10%

    10% Short-Term Bonds, or G Fund

    Ed

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  23. #12

    Default Re: Recommended allocations after retirement

    Quote Originally Posted by azanon View Post
    I'd probably go 20%I, 10%C, 10%S, 50%F, and 10%G, if all i had to use was TSP.
    The F fund has a poor risk vs return ratio... less than a point higher than the G fund for the last 10 years, with the prospect of losing cash.
    Official Retirement Date: 06-31-2014!

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