TSP question for Fed retirees

[Leon44]

I am considering rolling my traditional IRA into my TSP account to take full advantage of the low costs and the G fund. The G fund in my view would make a good substitute for bond funds. With no interest rate risk you get intermediate term bond rates. The G fund seems like an excellent perk for fed employees & retirees.

My only concern is TSP doesn't seem to have the same withdrawal flexibility as an IRA.

Has anyone else transferred their IRA fund into TSP?

Any thoughts on using the G fund for the bond portion in the asset allocation?

 

[RAE]

I'm a retired fed., and I think using the G fund within TSP as the bond portion of your asset allocation is a reasonable approach........it is basically what I do. I did not transfer my IRA into my TSP account, partly because a portion of my IRA is not tax-deferred money, and you can only transfer the tax-deferred portion of your IRA into TSP (it would get a little messy to figure out how much I could transfer, although it could be done). The other reason for me is that I like some of the Vanguard funds that my IRA is currently invested in, and would like to keep the money invested there for now.

With regard to withdrawal flexibility, you are correct that the TSP rules for withdrawals are more restrictive than withdrawing funds from an IRA. But in my case, it works out okay, because all I want to do is withdraw a set amount of $$ each month from my TSP, and you can easily do that (you can also change the monthly withdrawal amount once per year, in January). I do not envision needing to withdraw a large lump sum from my TSP at any point (after starting smaller monthly withdrawals). If you think that might be something you would want to do at some point, then it might make more sense for you to leave that money in an IRA, which would allow you more flexibility withdraw a large lump sum, whether you've already started taking monthly withdrawals or not.

 

[donheff]

I transferred an old traditional IRA into theTSP.

 

[RE2Boys]

I think using the G fund as the bond portion of your asset allocation is a great idea. I'm over 50% in G fund and this thread may motivate me to move the rest into G due to no interest rate risk going forward.

I haven't transferred any T-IRA money into the TSP as they won't take accounts if you have a basis in your T-IRA, which I'm slowly whittling down through yearly Roth conversions up to the top of the 15% tax bracket.

If your not at the point of taking RMDs and won't need the funds until that point, you could transfer the IRA money into the TSP now and convert it back to an IRA, or a portion of it, when you want more flexibility at a later time. Depends on your individual situation.

 

[W2R]

Although I also have substantial taxable investments, I keep my TSP entirely in G Fund as part of the 55% bonds/fixed in my planned asset allocation. Now that I have retired, I get monthly payments from my TSP account. The amount of the monthly payments can be changed once a year, if desired.

My TSP is like a pension surrogate for me and my monthly payments from it go towards paying my basic living expenses in retirement. Since the G Fund cannot decline in share value, there is an element of certainty that isn't there with other bond funds. I think it has worked out wonderfully, and may be the best part of my retirement strategy. If I wanted a large lump sum for some reason, I suppose that I would take it from my taxable accounts.

 

[Leon44]

" I keep my TSP entirely in G Fund as part of the 55% bonds/fixed in my planned asset allocation. "


This is what I am planning on doing as well. It's always reassuring to see other folks thinking the same way

 

[martyb]

As a soon-to-be retiring fed, I haven't decided yet how to invest my TSP funds. On one hand, I don't see treating it as a bond fund, because I feel like that's what my pension (CSRS) is for (low/no risk income). What I'll most likely do is move between G, F & L funds, depending on how the economy is doing. I know me, and I don't see me just letting it sit in the G fund, not earning much. Here it is, mid-November, and the G fund is barely on track to earn 1.5% this year. Not my idea of a good time! On the other hand, according to TSP, my 12 month Personal Investment Performance(PIP) rate as of the end of October was 27.52%. I know this isn't even close to sustainable, but I'd at least like to earn a little over the G fund when times are good. That said...I'm thinking I'll probably be taking around 3% to 3.5% from my TSP on a monthly basis. I'm not planning on taking a lump sum.

 

[W2R]

I'd at least like to earn a little over the G fund when times are good.

Absolutely, and especially if the TSP is the majority of (or all of) one's nestegg I would certainly urge investing in several funds including those other than G Fund, especially equity funds. Equity funds do outperform bond funds, especially in the long run, despite much more volatility which will give you a bigger "up" on the up side (as now), and a bigger "down" on the down side (as in late 2008).

The way I see it, the G Fund is essentially a cash equivalent with a bigger return than most savings accounts can provide these days.

 

[Leon44]

To me the only truly unique fund in TSP is the G fund. It is easy to duplicate the C fund, F fund, I Fund, etc.... outside of the TSP. But.......no other funds come close to the G fund for intermediate bond fund returns with no risk. I buy the Vangaurd index funds for the equity portion of my asset allocation.

I would not recommend anyone putting all of their assets in the G fund. But I do think the G fund is solid, safe replacement for the bond portion of my asset allocation, especially with rates so low.

 

[grumpy]

I transfered some of my IRA funds to the TSP G fund about two years ago. All of my TSP is in the G fund and other than a modest amount in I-bonds this is my entire bond allocation.

 

[samclem]

To me the only truly unique fund in TSP is the G fund. It is easy to duplicate the C fund, F fund, I Fund, etc.... outside of the TSP. But.......no other funds come close to the G fund for intermediate bond fund returns with no risk. I buy the Vangaurd index funds for the equity portion of my asset allocation.

It's true that the G Fund is the only TSP offering that is truly unique, but they are all different in at least one other way: Their costs. The TSP ER is now .025%. The ER for Vanguard's (very reasonably priced) Admiral funds average an ER of .16%, or over 6 times more than the TSP. If you've got a portfolio of $500K, that's a difference of $675 in costs per year. Not a fortune, but a lot of beer and pizza, and you'd pay it every year. Even ETFs have higher costs than the TSP funds (and ETFs have other potential costs when you sell, especially deviations in share price from NAV).

 

[ejw93]

As long as you leave at least $200 in the TSP, you can transfer funds in/out from an IRA at any time, even if you're not a current Fed or Fed retiree.

Here's a good post about why the TSP and you should stay together for life. It re-iterates the benefits of the G fund.

 

[zinger1457]

As long as you leave at least $200 in the TSP, you can transfer funds in/out from an IRA at any time, even if you're not a current Fed or Fed retiree.

Here's a good post about why the TSP and you should stay together for life. It re-iterates the benefits of the G fund.

Just to be clear, if you're currently employed as a FED you cannot transfer funds from the TSP to an IRA, except for a one time age based (>59.5) withdrawal. If you leave your job or are retired and want to keep your TSP account open you can only do a one time transfer to an IRA as a partial withdrawal from the TSP. It is true that you can transfer funds into the TSP from an IRA at any time. I still have my TSP because I like the investment options and low fees but the weak link with TSP has always been the withdrawal options.