New federal retiree transfer TSP balance question

[jgman]

Hello everyone,

Tomorrow is my last official day as an active federal employee. Been on annual leave since October 1 and now know I made the right decision (love not having to work anymore).

I am considering moving a large portion of my TSP into Charles Schwab. Also want to consolidate Vanguard Roth and Wells Fargo checking A/C into Charles Schwab so I have everything in one place.

Couple questions

Should I maintain the G fund in the TSP? (return on the G-Fund isn't much higher than a Money Market/Savings account).

Looks like Schwab has an American Express credit card with 1.5 percent cash back. Anyone have issues with American Express or should I stay with my Chase VISA?

Thoughts?
Thanks!

 

[freedomatlast]

First off, congratulations on retirement!

I can't comment on the G fund in the TSP, since I'm not a federal employee and know nothing about it, but for your question on the credit card, I'd say go with the Citi Double Cash card that gives you 2% cash back on all purchases, no restrictions, and no limits.

 

[Lakedog]

Should I maintain the G fund in the TSP? (return on the G-Fund isn't much higher than a Money Market/Savings account).

Not sure where you would find a money market or savings account paying the current G fund rate (1.5%). The rate changes monthly but has stayed a good bit higher than a money market/savings account.

 

[W2R]

I left my entire TSP balance in the G Fund, and then I take equal monthly withdrawals from it (simulating a pension). For this type of usage, I like that the G Fund is guaranteed to never drop in share price.

I'm not saying that you should do the same thing - - different federal retirees may have different goals and strategies. But, it has worked nicely for me in the way I described.

 

[Philliefan33]

DH is a Federal retiree (11 years) but has not moved any money out of the Thrift account. There are some benefits to keeping it there, such as the guaranteed return of the G Fund. I wouldn't be in a hurry to move things out -- once money comes out you cannot move it back. If after some months of planning and consideration you decide it's best for you to get out of the Thrift, do it then.

 

[jgman]

I plan to keep some money in the G fund but move my stock holdings to Schwab for greater flexibility/fund choices and to consolidate with my checking A/C. Schwab is also going to give me a 2k transfer bonus. Also, I believe I can move back into the G fund as needed (need to check on this).

freedomatlast I will check out the Citi Doubledash cc.

 

[jazz4cash]

Not sure where you would find a money market or savings account paying the current G fund rate (1.5%). The rate changes monthly but has stayed a good bit higher than a money market/savings account.

THIS!!!

I nearly choked on my beverage when I read that OP’s comment about G fund vs MM! DW is a Fed but I haven’t checked the G fund rate in a long while. I actually favor the L Income target date fund in the TSP which is ~70<% G fund. Keep TSP just for G fund but rebalancing gets difficult.

 

[rothlev]

Hello everyone,

Tomorrow is my last official day as an active federal employee. Been on annual leave since October 1 and now know I made the right decision (love not having to work anymore).

I am considering moving a large portion of my TSP into Charles Schwab. Also want to consolidate Vanguard Roth and Wells Fargo checking A/C into Charles Schwab so I have everything in one place.

Couple questions

Should I maintain the G fund in the TSP? (return on the G-Fund isn't much higher than a Money Market/Savings account).

Looks like Schwab has an American Express credit card with 1.5 percent cash back. Anyone have issues with American Express or should I stay with my Chase VISA?

Thoughts?
Thanks!

I would leave money there. Lowest expenses you can get.

 

[donheff]

I moved a portion of my TSP to Schwab and use the RMDs there for qualified charitable distributions (QCDs, which can't be done from the TSP). The remainder in the TSP is in G and serves as a "super cash" fund in our joint AA. Like W2R I take standard monthly payments from the TSP - mine are RMDs. I could take more out or convert some of the G to equities and liquidate elsewhere (e.g. taxable) if I need to access that "cash" in a downturn.

About ten years ago I transferred a small tIRA into the TSP.

 

[SnowballCamper]

To me, the thing that the G fund has that you really can't get anyplace else (except treasury bonds) is no market risk, and a great rate of return for a cash like asset. The federal government sells the G-fund securities to the TSP only, and there is no secondary market. If you want/need this then definitely keep the TSP.

I keep the TSP for simplicity and low cost, and use the G fund for my bond allocation to rebalance against C, S, and I funds.

To me, it doesn't make any sense to keep the TSP just for the G fund, as you can't use it to rebalance...unless it's your emergency fund and you are over 59.5

 

[donheff]

To me, it doesn't make any sense to keep the TSP just for the G fund, as you can't use it to rebalance...unless it's your emergency fund and you are over 59.5

You can use it anyway you want. For example, if you want cash in a downturn when you are 40, sell equities in taxable and simultaneously exchange a balancing amount of G for C in the TSP.

 

[jgman]

I need to keep some in the G fund/TSP as I'm not 59 1/2 yet and will need to withdraw. Moving the rest to Schwab for convenience and flexibility....and the transfer bonus is nice also.

 

[SnowballCamper]

You can use it anyway you want. For example, if you want cash in a downturn when you are 40, sell equities in taxable and simultaneously exchange a balancing amount of G for C in the TSP.

Yes, but if you make your TSP 100% G fund because you moved a bunch out to a brokerage, then get gains in your brokerage, how do you rebalance back into the G fund?

 

[jgman]

Yes, but if you make your TSP 100% G fund because you moved a bunch out to a brokerage, then get gains in your brokerage, how do you rebalance back into the G fund?

I would setup a comparable G fund account in Schwab

 

[donheff]

Yes, but if you make your TSP 100% G fund because you moved a bunch out to a brokerage, then get gains in your brokerage, how do you rebalance back into the G fund?

I may not understand the question. I would only keep the TSP 100% in G if it was a portion of my bond holdings. I would adjust holdings at Schwab or wherever to get my overall AA to where I wanted it. If the TSP account is too large to be 100% G without exceeding you bond and/or cash AA, then I would exchange some of the G for C to get my AA where I want it (i.e. I would no longer keep 100% of TSP in G)

The bottom line is the TSP G fund is a good "super MM" for the appropriate portion of your portfolio. It can serve that function as part of a larger portfolio or as part of your TSP holdings if TSP is the entire portfolio.

 

[jgman]

I may not understand the question. I would only keep the TSP 100% in G if it was a portion of my bond holdings. I would adjust holdings at Schwab or wherever to get my overall AA to where I wanted it. If the TSP account is too large to be 100% G without exceeding you bond and/or cash AA, then I would exchange some of the G for C to get my AA where I want it (i.e. I would no longer keep 100% of TSP in G)

The bottom line is the TSP G fund is a good "super MM" for the appropriate portion of your portfolio. It can serve that function as part of a larger portfolio or as part of your TSP holdings if TSP is the entire portfolio.

Yes my TSP will be 100 percent G fund after I transfer to Schwab.

Regarding my AA, should I factor in my FERS pension when determining my AA? I expect my Pension to be roughly 50 percent of my retirement income....is my 60/40 stocks to bond ration to conservative (Ill be 57 in two wks)?

Also any recommendations on a fixed income/bond fund at Schwab for primarily rebalancing (won't be able to move money back into G fund until 59 1/2)....perhaps a MM with expected interest rates hikes in 2022?

Thanks

 

[SnowballCamper]

I'll try to elaborate on what I did a bad job of saying a couple posts up the page:

Suppose my $100k portfolio AA is 30% G fund, and 70% stock outside the TSP. Then a market "crash" like 2007 happens where the stocks drop 50%. Then I have 30k in G fund and 35k in stocks and I should rebalance. To rebalance I have to sell G fund shares to buy stocks in the amount of $10,500 to get back to 70/30 allocation which is now 45.5k stock and 19.5k G fund. If I'm going to hold stocks outside the TSP, then I have to do an IRA rollover to buy the stocks outside the TSP. I'd consider that a real hassle just to rebalance.

Then a few years go by and the market does it's magic, but I've been busy working hard and neglected things a bit, and now my AA is out of whack again because stocks have gone up so that I hold 20k G fund and 80k in stocks. I need to rebalance back to my AA of 70/30. I can sell 10k of stocks from my brokerage, but I can't transfer that into my TSP G-fund because the TSP only allows contributions from pay.

So these are two examples of how we can't really use the G fund any way we want if we're trying to rebalance with assets outside the TSP. Of course there are work arounds, because money is fungible...

As for an asset allocation that accounts for pension income, check out https://www.aacalc.com

 

[donheff]

I'll try to elaborate on what I did a bad job of saying a couple posts up the page:

Suppose my $100k portfolio AA is 30% G fund, and 70% stock outside the TSP. Then a market "crash" like 2007 happens where the stocks drop 50%. Then I have 30k in G fund and 35k in stocks and I should rebalance. To rebalance I have to sell G fund shares to buy stocks in the amount of $10,500 to get back to 70/30 allocation which is now 45.5k stock and 19.5k G fund. If I'm going to hold stocks outside the TSP, then I have to do an IRA rollover to buy the stocks outside the TSP. I'd consider that a real hassle just to rebalance.

Then a few years go by and the market does it's magic, but I've been busy working hard and neglected things a bit, and now my AA is out of whack again because stocks have gone up so that I hold 20k G fund and 80k in stocks. I need to rebalance back to my AA of 70/30. I can sell 10k of stocks from my brokerage, but I can't transfer that into my TSP G-fund because the TSP only allows contributions from pay.

So these are two examples of how we can't really use the G fund any way we want if we're trying to rebalance with assets outside the TSP. Of course there are work arounds, because money is fungible...

As for an asset allocation that accounts for pension income, check out https://www.aacalc.com

Sounds like you are overthinking this. Your first step was the answer. After the crash you exchange enough of your G fund for equities to bring your total portfolio back into your desired 70/30 AA. Problem solved. After the market recovers, you reverse the process and exchange enough of your TSP C fund for G to restore the 70/30 AA. Problem two solved. Assuming the market roars you might eventually get back to 100 G in the TSP and even have to move some of your Schwab equities into bonds to keep the 70/30 AA.

 

[donheff]

Yes my TSP will be 100 percent G fund after I transfer to Schwab.

Regarding my AA, should I factor in my FERS pension when determining my AA? I expect my Pension to be roughly 50 percent of my retirement income....is my 60/40 stocks to bond ration to conservative (Ill be 57 in two wks)?

Also any recommendations on a fixed income/bond fund at Schwab for primarily rebalancing (won't be able to move money back into G fund until 59 1/2)....perhaps a MM with expected interest rates hikes in 2022?

Thanks

Different posters here approach your pension question from different perspectives. My approach is to determine how much my expenses will exceed my guaranteed income sources. My portfolio has to meet those expenses. My risk tolerance is tied to how much of those uncovered expenses are essential versus discretionary. The more they are discretionary the higher my risk tolerance and the more equities I am willing to carry in my AA.

I don't know about bond funds at Schwab but I also don't understand what you mean about moving money back into the TSP after 59. Not sure why you would want to move funds back to the TSP after you moved them out but if you decide you want to do so you can roll over a portion of your Schwab or other IRA into the TSP anytime you want. I did that with an American Funds IRA.

 

[jgman]

I don't know about bond funds at Schwab but I also don't understand what you mean about moving money back into the TSP after 59. Not sure why you would want to move funds back to the TSP after you moved them out but if you decide you want to do so you can roll over a portion of your Schwab or other IRA into the TSP anytime you want. I did that with an American Funds IRA.

The reason to move back to the G fund is to rebalance if stocks go up in my Schwab IRA. The issue is whether I can do that if I move TSP money into a Schwab IRA before 59 1/2. Will I incur the 10 percent penalty if I need to move that money back to the G Fund before 59 1/2 to rebalance if necessary?

 

[donheff]

The reason to move back to the G fund is to rebalance if stocks go up in my Schwab IRA. The issue is whether I can do that if I move TSP money into a Schwab IRA before 59 1/2. Will I incur the 10 percent penalty if I need to move that money back to the G Fund before 59 1/2 to rebalance if necessary?

No, you can roll a portion of the Schwab IRA into the TSP. You just have to specify that it is a rollover not a withdrawal. No taxes involved. But why would you do that/ You can just buy some bonds in the Schwab account to get your portfolio in balance. What are you trying to achieve by transferring funds back to the TSP?

 

[jgman]

No, you can roll a portion of the Schwab IRA into the TSP. You just have to specify that it is a rollover not a withdrawal. No taxes involved. But why would you do that/ You can just buy some bonds in the Schwab account to get your portfolio in balance. What are you trying to achieve by transferring funds back to the TSP?

The G Fund is much better than the Schwab MM funds hence the desire to use it exclusively for my fixed income allocation. Also, I read somewhere that once you withdraw funds from the TSP you can't go back in.

I may ultimately forego some of the transfer bonus from Schwab and keep more money in the TSP so I won't have to go back and forth.

 

[yakers]

You absolutely can go back and forth, I've done it, but it is not simple or particularly fast.If you have $ in the G Fund and if the equities market drops in your overall portfolio AA you just move some of the G Fund into the C Fund, that is VERY easy.

 

[jgman]

You absolutely can go back and forth, I've done it, but it is not simple or particularly fast.If you have $ in the G Fund and if the equities market drops in your overall portfolio AA you just move some of the G Fund into the C Fund, that is VERY easy.

Meant to preface moving back into the TSP before 59 I/2 after withdrawing. Is that also allowable w/o penalty?

 

[jazz4cash]

I would setup a comparable G fund account in Schwab

What does Schwab offer that is comparable to the TSP G fund?