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Thread: Using TSP G fund as your cash bucket in retirement?

  1. #1

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    Default Using TSP G fund as your cash bucket in retirement?

    I have had seen several retirement experts talk about having three buckets - cash, income and growth based on when you will need the money. The "cash" bucket holds money that you will need in the next 3 to 5 years - your anticipated cash needs (i.e. monthly spending minus FERS and SS income). I was wondering if I could make the G fund my cash bucket? Can I move all but 5 years of anticipated cash needs from my TSP into a traditional IRA(s) where those buckets would be invested for growth and income, and then replenish the TSP G fund account as it is used with money from the "surplus" Traditional IRA growth and income? What are the plusses and minuses of separating it out that way?


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  3. #2

    Default Re: Using TSP G fund as your cash bucket in retirement?

    I may have misunderstood, but if you are already retired I don't think you will be able to add money to the G-fund. If you're still working I suppose you can redirect contributions to G to build it up. But money markets in an IRA are similar to the G fund, and probably easier to get to if you need it.
    Tom
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  5. #3

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    Default Re: Using TSP G fund as your cash bucket in retirement?

    Bucket approaches make things more complicated than they need to be. Don't forget, money in the G fund is still subject to taxes when withdrawn.

    L-Income is a very solid allocation for an emergency fund that will beat any money market account in real returns over 3-5 years. You could keep it in TSP which will auto rebalance, or roll your own with a few ETF's

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    Default Re: Using TSP G fund as your cash bucket in retirement?

    Quote Originally Posted by tsptalk View Post
    I may have misunderstood, but if you are already retired I don't think you will be able to add money to the G-fund.
    I was under the impression that I can move money from a traditional IRA to the Traditional TSP using the TSP form 60. So for example if my TSP is 100K when I retire, I move 70K to a traditional IRA at retirement and leave the other 30K in G fund for regular monthly distributions to cover my cash needs. At the end of the year (or other appropriate time based on the market), I transfer money from that traditional IRA back to the G fund in my TSP account. In theory, as that IRA fund grows, the spillover can replenish the TSP account. This prevents money from coming out of C, S, and I when the market is down (proportional withdrawals required by TSP). Bullit's point about L income is well taken - perhaps it is in L-Income vs. G, but my point is if I am going to make regualr withdrawals from TSP, I want it to come out of G (or L-income) NOT C, S or I when the market dips - that would be like "dollar cost averaging" the wrong way - taking out more shares when the market dips to realize the same monthly payments.

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    Default Re: Using TSP G fund as your cash bucket in retirement?

    I see what you're saying, but it all sounds like a matter of mental accounting.

    If the market is down, lets say a 2008 scenario, not some ridiculous 5% drop, and you're drawing down from that G fund, you're going to have to move money back to TSP by selling whatever holdings you have in the Traditional IRA to keep your allocations proper according to your risk levels.

    How much risk are you looking to take in retirement? If you have a balanced portfolio in retirement, it won't be as much of a hit in a down market when you withdraw funds. If you have 50G/50C, you're still withdrawing half your G fund, so it's not all C fund being liquidated. When you pull the plug, you should have your number in TSP with a conservative allocation that affords some growth with minimal risk of drawdown.

    There is a great deal of luck involved, more than most want to admit. It was much easier to retire in the last 10 years than it was in 2007-2008, but if you hit your number, you should be able to sustain any market turbulence as long as you keep a conservative withdrawal rate.

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  11. #6

    Default Re: Using TSP G fund as your cash bucket in retirement?

    Quote Originally Posted by flalaw97 View Post
    I was under the impression that I can move money from a traditional IRA to the Traditional TSP using the TSP form 60.
    OK, gotcha. I thought you were talking about making contributions after retirement. IRA rollovers seem to work. Sorry for the misinfo.
    Tom
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  13. #7

    Default Re: Using TSP G fund as your cash bucket in retirement?

    Won't it be easier to do it the other way around? IRA is your cash fund and TSP is your growth/emergency fund.
    Based on my experience, it is a lot easier to withdraw from IRA.
    Every Time I needed to withdraw from TSP, I need to have the form notarized for spouse's signature.
    I tried a monthly with TSP to avoid monthly notarization (just one time form), but then I can't time the withdrawal.
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  15. Default Re: Using TSP G fund as your cash bucket in retirement?

    Following.......

    Thank you for posting this question and for those providing input/suggestions. I am in the process of retiring and our Charles Schwab Financial Consultant has suggested the same Bucket Strategy. I'm hesitant about moving large amounts of my TSP at one time. Might look at moving 10-20% over a five to ten year period with Roth conversions in the mix.

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    Default Re: Using TSP G fund as your cash bucket in retirement?

    Quote Originally Posted by Maricar19 View Post
    Won't it be easier to do it the other way around? IRA is your cash fund and TSP is your growth/emergency fund.
    Based on my experience, it is a lot easier to withdraw from IRA.
    Every Time I needed to withdraw from TSP, I need to have the form notarized for spouse's signature.
    I tried a monthly with TSP to avoid monthly notarization (just one time form), but then I can't time the withdrawal.
    You might be right that it is easier to pull money from the IRA but most people I have seen said they want the growth/equities bucket to be outside of TSP to increase their investing options and movement (not limited to 2 IFTs). My thinking is if I know I will need a monthly check of $2000 to make up for the gap between my monthly spending of $7000 and my $5000/mo retirement income (pension plus supplement/SS) then I don't have to time it if it is only invested in L-income or G fund. I just have to replenish it from the Growth IRA at some point (when the market is up).


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    Default Re: Using TSP G fund as your cash bucket in retirement?

    Quote Originally Posted by 47_Dodge View Post
    Following.......

    Thank you for posting this question and for those providing input/suggestions. I am in the process of retiring and our Charles Schwab Financial Consultant has suggested the same Bucket Strategy. I'm hesitant about moving large amounts of my TSP at one time. Might look at moving 10-20% over a five to ten year period with Roth conversions in the mix.
    Definitely have to be careful about tax implications of pulling money out of TSP in large chunks - transfer to IRA vs taxable distribution to you. I also am hoping to move some money in small chunks from TSP to Roth IRA after retirement when hopefully I am in a lower tax bracket than now. That math is taxing my brain (no pun intended).

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  21. #11

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    Default Re: Using TSP G fund as your cash bucket in retirement?

    Quote Originally Posted by Bullitt View Post
    I see what you're saying, but it all sounds like a matter of mental accounting.

    If the market is down, lets say a 2008 scenario, not some ridiculous 5% drop, and you're drawing down from that G fund, you're going to have to move money back to TSP by selling whatever holdings you have in the Traditional IRA to keep your allocations proper according to your risk levels.

    How much risk are you looking to take in retirement? If you have a balanced portfolio in retirement, it won't be as much of a hit in a down market when you withdraw funds. If you have 50G/50C, you're still withdrawing half your G fund, so it's not all C fund being liquidated. When you pull the plug, you should have your number in TSP with a conservative allocation that affords some growth with minimal risk of drawdown.

    There is a great deal of luck involved, more than most want to admit. It was much easier to retire in the last 10 years than it was in 2007-2008, but if you hit your number, you should be able to sustain any market turbulence as long as you keep a conservative withdrawal rate.
    Love this response! You are correct that in 2008 I didn't think I would be able to consider retiring in 2023 at MRA (56&4mo) but now it is a possibility. With life expectancies into the 80s, I think even in retirement I will need to have a decent chunk of money still invested pretty heavily in the market - that is almost 25 years away and I don't know if I have enough to invest conservatively with an expected 4-6% growth? The bucket strategy is mental math converted to paper for me. If I can see 5 years of cash needs in that bucket (account) and another 5 years in an income bucket and everything else (more than 10 years away from need) in a diversified growth account, then it seems easier to understand what each pile of money is intended to do and therefore how risky I can be without upsetting the applecart. Great discussions.

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  23. #12

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    Default Re: Using TSP G fund as your cash bucket in retirement?

    Right. Longevity is probably the biggest risk we all face in retirement. Most of us will require a higher allocation to stocks at an older age than previous generations for that reason alone.

    I also think it's a good idea to keep TSP forever for the G Fund. Minimum amount is something like $300 to remain active. You never know, you might want to move it all back to the G Fund 25 years from now. It's a safer place than a money market fund (FDIC limitations), bond or stock fund.

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