Following tspallocation advice retirement.

THE THRIFT SAVINGS PLAN ALLOCATION GUIDE Forums Message Board Following tspallocation advice retirement.

This topic contains 2 replies, has 2 voices, and was last updated by  Jon 5 years, 4 months ago.

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  • #9062

    Jon

    Okay, I have studied and read this blog’s advice. It really makes sense. However, I am planning to retire from federal law enforcement this summer. I guess I need to be somewhat conservative to sleep well at night as I transition to depending on the TSP monthly payments for part of my retirement income.

    Therefore, I’m considering the following:

    I’m very comfortable with the old equities formula of determining your equities allocation by subtracting my age from 110. Therefore, this Summer, at the age of 52, I will put 42 percent of my TSP balance in the G-Fund. The 58 percent balance could be put in the tspallocation.com recommended fund (G/F/C/S/I).

    Sound good?

    #9072

    TS Paul
    Keymaster

    As always, I can’t give individual advice. But within my own account I think it will depend on how soon I think I will be using that 42%. If that is going to be money I will be counting on using in the next 2-3 years, I would agree that being conservative with it would be a good idea to protect against a significant correction. But otherwise, at 52 I have decades of earning left to do with my TSP and I probably won’t feel like I need to protect such a high percentage.

    Let’s say I had $500,000 in my TSP at this time last year and had done what you describe above. The difference between being fully invested in equities (let’s say the S Fund), and being 58% S Fund and 42% G Fund would have been a return of $191,750 versus a return of $115,184 (111,215 from the S plus 3,969 from the G). I know I’m cherry picking after the great year we had last year, but let’s say the difference was only half that. That’s still a lot of money, even before you compound it at say 10% for twenty years.

    I think the 110 minus your age rule is way too simplistic. There are a lot of variables between different investors. Is that for someone whose retirement income is going to come exclusively from their investments? Or for someone like you who has a significant income coming in from a pension (FERS)? For someone with their house paid off in a place with no state income tax, or someone with a big mortgage in a high cost of living area?

    The TSP Allocation Guide www.TSPallocation.com

    #9089

    Jon

    Thank you. I do have a FERS pension and also have landed a part-time retirement job. Therefore, my tsp will only be providing approximately a third of my retirement income. I’ll have to consider my level of risk of the next six months.

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