TSP Allocation...most Feds too conservative...

[Redbugdave]

I ran across this article about the TSP allocations that most Feds are in... may be too conservative. I have stayed in the S and C funds, and virtually no G since I have been contributing. The jest of the article states that a good portion of a FED's retirement comes from fixed sources...annuity, FERS suppliment or SS. Looking at the whole pie, a person could afford to be aggressive in their TSP since the other portion of their retirement is "fixed". Makes sense to me. I have stayed aggressive and will continue that way. Interesting article with an interesting viewpoint.

Read on. Opinions?
The Whole Story on Federal Retirement Income

 

[plex]

Sure, as long as you are at least within range of at least starting your pension, and it is substantial, otherwise, the TSP has to handle significant draw-downs for a number of years until these stable sources of income come into play.

 

[grumpy]

It doesn't make sense to analyze TSP allocations without reference to an individual's overall asset allocation.

I'm a retired fed. My TSP allocation is 100% G fund. Is this too conservative? My TSP account represents only 12% of my total invested assets. My overall asset allocation is 52% to equities. The G fund provides, by far, the highest risk free fixed income return available compared to bank accounts or money market funds so I use it for that purpose.

 

[timo2]

It doesn't make sense to analyze TSP allocations without reference to an individual's overall asset allocation.

I'm a retired fed. My TSP allocation is 100% G fund. Is this too conservative? My TSP account represents only 12% of my total invested assets. My overall asset allocation is 52% to equities. The G fund provides, by far, the highest risk free fixed income return available compared to bank accounts or money market funds so I use it for that purpose.

+1

This is not the first article that represents this view, but what the writers don't (or won't) cover is that people are using the G fund as the conservative portion of their overall portfolio. If your only retirement savings are in the TSP, then the article would be applicable.

In my case, even though I'm maxing out my contributions to the G fund in TSP, the G fund is only 30% of the retirement accounts of my spouse and I combined. The reason is my DW's 401a and 457 do not have the any choices with safe features of the G fund. (do a search on bogleheads Bogleheads Investing Advice and Info for G fund...there is a lot of interesting information about it there). We have the equities in the 457, because index funds are the only good choices there; and then a stable fixed fund for the 401a, because it earns well with lower risk (my DW will ER at 56 in a couple of years, and she wants to tap the 401a then).

 

[timo2]

I ran across this article about the TSP allocations that most Feds are in... may be too conservative. I have stayed in the S and C funds, and virtually no G since I have been contributing. The jest of the article states that a good portion of a FED's retirement comes from fixed sources...annuity, FERS suppliment or SS. Looking at the whole pie, a person could afford to be aggressive in their TSP since the other portion of their retirement is "fixed". Makes sense to me. I have stayed aggressive and will continue that way. Interesting article with an interesting viewpoint.

Read on. Opinions?
The Whole Story on Federal Retirement Income

One thing to consider with the 'FIXED' argument is that they may not be so 'fixed'. While the FERS annuity has a COLA, it does not keep up with inflation.


This is derived from Federal Retiree COLA History: CSRS COLA and FERS COLA

• If the CPI is more than 3%, the FERS COLA is 1% less
• If the CPI is more than 2% but less than 3%, then the FERS COLA is 2%.
• If the CPI is less than 2%, then the FERS COLA is the same.

CSRS (old fed pension) is the same as the CPI.

Additionally, if chained-CPI is implemented, than this will lower the FERS COLA lower still.

and obviously SS would also be affected by the Chained CPI.

So if the 'fixed' sources do not keep up with inflation, that means we need to find something to make up that gap later on.

 

[nash031]

My TSP represents close to 80% of my total bond holdings, but less than 35% of my overall retirement savings. It also accounts for almost all of my international equity allocation.

People use it for different things. I know I use TSP to balance my AA more than anything because trades are free. Generally speaking, once I buy it in my taxables and IRA, I don't touch it. Then I adjust the I, C, and F funds inside TSP to get my AA where I want it. Right now, a larger portion of my monthly TSP contribution is going to the I-fund which is relatively cheap as compared to C and F.

 

[mortal]

I was lucky enough to land a internship / coop with the navy while I was in college. For whatever reason, I decided to contribute to the TSP, and by the time I left, I had enough in the account that I could elect to keep it there if I so choose.

Since that time, I've learned that the TSP is basically the best 401k out there. Every time I have changed jobs, I've rolled my 401k *into* the TSP, and I use the G fund as the bond portion of my portfolio. If someone running the TSP saw my account, they'd scoff at someone my age being 100% G fund, but it's only 30% of my total assets.

I'd like to travel back in time and buy my 23 year old self a beer for being so damned responsible.

 

[donheff]

I have my entire TSP in the G Fund. I use at as our joint cash reserve. It pays an average of intermediate T Bills and can't lose principle.