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Old 08-06-2014, 07:01 AM   #1
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I am 67 years old and retiring next month. I previously retired for the federal government; however, I have not yet begun withdrawing from my Thrift Savings Plan (TSP).
My federal retirement consists of my federal pension, Social Security, and TSP. I also have three Vanguard IRAís. My assets total $880,000 (TSP, 73.9%; Vanguard Long Term Bond, 7.5%; Wellesley Admiral, 9.2%; and REIT Index Admiral, 9.4%).
I am considering three options: (1) leave my assets where they are; (2) move everything, including transferring the IRAís, to the L-Income fund; or (3) keep the IRAís where they are and move my L-2020 into the L-Income fund, which is designed for those currently in retirement. I am sure there are many other options; however, my investments have done well over the years and I prefer a conservative approach.
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Old 08-06-2014, 08:07 AM   #2
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The essence of your question is asset allocation. If your federal pension and SS would cover your living costs (or a high percentage of your living costs), then there are two schools of though on asset allocation. One school of thought is that you have "won the game" and can invest solely in fixed income and don't need to own any stocks or take on any risk. The other extreme is since you are not relying on your portfolio that you can be aggressive and have a high allocation to stocks since your pension and SS will allow you to ride out any volatility.

While I favor a heavier equity allocation because I am comfortable with risk (I'm dancing with the girl that brought me to ER and her name is "Equities" ) others are less comfortable with risk.

If you polled forum members, most stock allocations range from 30% to 70%. IIRC, portfolio survival doesn't vary much within this 30-70% range so it becomes a matter of personal preference and comfort with risk.

I would not advise going all in to fixed income unless your pension and SS are a high percentage of your living expenses as such a portfolio would expose you to a lot of inflation risk.
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Old 08-06-2014, 12:57 PM   #3
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Originally Posted by pb4uski View Post
The essence of your question is asset allocation. If your federal pension and SS would cover your living costs (or a high percentage of your living costs), then there are two schools of though on asset allocation. One school of thought is that you have "won the bgame" and can invest solely in fixed income and don't need to own any stocks or take on any risk. The other extreme is since you are not relying on your portfolio that you can be aggressive and have a high allocation to stocks since your pension and SS will allow you to ride out any volatility.

While I favor a heavier equity allocation because I am comfortable with risk (I'm dancing with the girl that brought me to ER and her name is "Equities") others are less comfortable with risk.

If you polled forum members, most stock allocations range from 30% to 70%. IIRC, portfolio survival doesn't vary much within this 30-70% range so it becomes a matter of personal preference and comfort with risk.

I would not advise going all in to fixed income unless your pension and SS are a high percentage of your living expenses as such a portfolio would expose you to a lot of inflation risk.
Great answer, IMO. I'm a couple of years older than the OP and have a federal pension + SS which my wife and I live comfortably on. I've opted for about 45% equities, 50% fixed income and 5% cash. As noted above, people are all over the place on asset allocation and this one feels about right to me.
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Old 08-06-2014, 04:21 PM   #4
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I'm retired FERS. At the earliest possible moment, I rolled my entire TSP account out to an IRA type account that could invest in real estate. A sample purchase: 2 bedroom, 1 bath, 1 car garage, red brick, about 3 mile from the college. Bought early 2013 for $77,500, rented for $805/month. After property tax, insurance, etc. itís dumping around $7000 (9%) a year tax-deferred into the account. Since we donít need the money yet, I keep putting it back into improvements in the house. Compare this to an annuity from the TSP program.
https://www.tsp.gov/planningtools/re...lculator.shtml
If at my retirement I had chosen that option, and allocated $77,500 to it, and wanted an annuity for my lifetime, which would continue for the wife's lifetime, TSP would only have offered a FIXED annuity of $306 per month or $3,672/year (4.7%) . No inflation adjustment. If the wife and I both died (say in the same car accident) the kid would have gotten nothing.
With the rental inflation is again rising the dollar value of the the house, and I could probably raise the rentÖ.
With the money in an IRA type account, if you want you can pick the same investments as within the TSP, but the options are LOTS wider.
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Old 08-06-2014, 08:00 PM   #5
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.......... One school of thought is that you have "won the game" and can invest solely in fixed income and don't need to own any stocks or take on any risk. The other extreme is since you are not relying on your portfolio that you can be aggressive and have a high allocation to stocks since your pension and SS will allow you to ride out any volatility.
.........
I'm in a similar situation to the OP, but prefer to go the more aggressive route to self insure for end of life care.
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Old 08-06-2014, 11:01 PM   #6
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. . . At the earliest possible moment, I rolled my entire TSP account out to an IRA type account that could invest in real estate. . . .
With the rental inflation is again rising the dollar value of the the house, and I could probably raise the rent….
There's nothing wrong with investing in rental properties, but it's not a passive investment (just like you tell the IRS). The TSP isn't going to need a new roof, or call you when the water heater starts gushing, or maybe skip town and leave the water flooding the house as a little "present" for the mean landlord.
You've bought yourself a job, and that's fine. But some people might say that a landlord managing several properties himself isn't really retired.
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Old 08-07-2014, 07:51 AM   #7
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I'm a federal retiree as well with my retirement investments about 50/50 TSP and IRAs. I believe you'll find that the TSP/IRA mix is a good strategy.

TSP has unbeatably low expense ratios and a good menu of funds, but withdrawal options are limited and there are investment choices not included in the TSP array of funds.

Your IRAs offer more flexibility in withdrawal and a wider array of investment options.

A mix allows you to take a monthly TSP withdrawal as a foundation for your income with the IRAs available for lump sum or emergency funds.

With that combination, as mentioned in other posts, you need to decide the asset allocation that works for your risk tolerance and income needs. I'm a 50/50 Equity/Fixed Income guy myself, but we all need to find out proper allocation. L Income is about 20/80 and L 2020 is about 50/50 to give you some context.

Bottom Line...I would keep your TSP/IRA mix of sources, analyze your risk tolerance/income needs to ensure the funds you have in each source are appropriate and enjoy your retirement

Best of luck.
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