Which TSP L fund to choose? Or DIY?

[whipsaw]

I was born in 1979 which puts me at age 65 in late 2044, essentially in the middle of 2040 and 2050. Up to this point I have put all my contributions in my TSP L2040 fund but looking at the breakdown it seems a tad conservative. Would you choose to contribute to the 2040 fund, the 2050 fund, or DIY? For a DIY approach I would probably split the difference between the two funds for AA and rebalance semiannually or something like that. With a 30+ year time horizon until I want to start tapping these funds, 14% in G looks awfully conservative in particular.

L2040 (for October 2013):

G Fund 14%
F Fund 9%
C Fund 39%
S Fund 16%
I Fund 22%

L2050 (for October 2013):

G Fund 4%
F Fund 9%
C Fund 43%
S Fund 18%
I Fund 26%

G Fund: Government Securities Investment Fund
F Fund: Fixed Income Index Investment Fund
C Fund: Common Stock Index Investment Fund
S Fund: Small Cap Stock Index Investment Fund
I Fund: International Stock Index Investment Fund

 

[F4mandolin]

With what I know now.....I spent WAY too much time in my beginning years with money in the G fund. Those people I worked with who were more aggressive than me (both in amount and in fund type) had a lot more stashed away. At this time (56 retired 2 years) I have half in 2020 and half in 2030.

 

[nash031]

I DIY(M, I guess) in my TSP. I do that because TSP accounts for my bond allocation through use of F and G funds. When I rebalance (semi-annual checkup, though I don't always move things), I rebalance via TSP, usually by raising the contribution allocation into F and G, though sometimes I exchange C and into F and G.

In my IRAs and taxable, I have mostly Total Market Index funds.

Anyway, that's just how I do it: I view TSP as a vehicle to fulfill certain parts of my overall AA (80-90/20-10). Keeping the bonds (about 30-35% of my total TSP currently) in TSP keeps the income tax-free, and the expense ratio ridiculously low! (Plus, the G fund is unavailable anywhere else, and supposedly the "perfect fund" for the withdrawal phase, at least that's what I read...).

I also have most of my international allocation in TSP, though the I fund doesn't include Canada or emerging markets. Still, it's the lowest ER International Index fund there is...

 

[timo2]

The answer for you really depends on how much you have in non-TSP investments, if any. If you or your spouse can put a lot into low cost index funds outside the TSP, then the G fund is a superior place for the low risk portion of the portfolio. Much better than the non-TSP conservative investments. But if your only retirement investment is the TSP, one of the L funds would work out OK for you.

I became disillusioned with the L funds. I would rather DIY, especially when I didn't want to include the F or I funds in my portfolio, or wanted to count my spouses index funds as part of the overall family portfolio. I found that bogleheads has a lot to read regarding the TSP. One interesting thing that one or two people are proponents of is to consider the FERs pension and possibly SS as being the safe investments in your portfolio, which would justify putting a higher portion of the TSP into the equity funds (which rules out an L fund). Most people seem to think that is a bad idea, but the pension does offer a small padding against market downturns.

 

[plex]

I definitely use DIY.

After a down market, I tilt heavily into S, midway through I'd use a mix of S, C, and I, and after a long good run I'd have a mix of C, G, S, and I.

If I was in the draw-down stage, I would have most/all of it in G, I'd need 20-30% of my portfolio in something safe just about all of the time, and it definitely is a good option for that, the bulk of my portfolio would be in taxables, aiming for early retirement makes it tough to have the bulk of one's assets in the TSP.

 

[RAE]

I'm a retired Fed, and I've always preferred a DIY allocation for my TSP funds, rather than going with any of the L funds. I see no reason to go with something they designed that may not be ideal for your situation, when you can design your own asset allocation that suits your individual needs. I've been retired for 3+ years now, so I have gradually shifted to a more conservative allocation over time, and it's worked out well for me.

 

[clifp]

The TSP has such good and simple choices I'd definitely do a DIY.

40% C
25% I
25% S
10% F
And every 5 years increase F by 5%.

 

[Kaufmanrider]

I was born in 1979 which puts me at age 65 in late 2044,

At your age, I'd be heavily invested in C/S/I gradually shifting some into G/F as you get older. If you want to play it safe and diversify in a DIY investment look at 20% each, G,F,C,S,I. This would give you a 60/40 stock/bond split, or maybe look at an 70/30 or 80/20 split at your age and time horizon.

 

[yakers]

Retired in March 08, (worst possible time?)
my TSP AA is 40% C, 40% G, 15% I and 5% S, I rebalance inside the TSP every 12 to 18 months if the G fund is up or down about 5%
The TSP is about 30% of our total financial assets, DW's IRA is Wellesley & Star funds. And I have a collection of stuff in a WF IRA and a taxable account. Last I checked our portfolio is about 60% stock 40% fixed and I am letting it go higher on equities up to 70/30 before trying to rebalance the overall portfolio.

 

[martyb]

Retired in March 08, (worst possible time?)
my TSP AA is 40% C, 40% G, 15% I and 5% S, I rebalance inside the TSP every 12 to 18 months if the G fund is up or down about 5%
The TSP is about 30% of our total financial assets, DW's IRA is Wellesley & Star funds. And I have a collection of stuff in a WF IRA and a taxable account. Last I checked our portfolio is about 60% stock 40% fixed and I am letting it go higher on equities up to 70/30 before trying to rebalance the overall portfolio.

Thanks yakers. I'm about to retire, and I think I'm going to set up my TSP A/A pretty close to yours. I notice you have no F in there, only G. I'm kind of leaning the same way. I might go a little heavier on S and less on G though, at least in the beginning. Unlike you, we won't have much in the way of investments outside of my TSP, her 401k & our smaller Roth IRAs. My federal CSRS pension and my eventual military retirement will be the bulk of our living funds, plus she'll get small SS about 9 1/2 yrs from now. We'll figure out what to do with the TSP money later on, but I definitely want to get into some kind of sane A/A and stop worrying about trying to hit the market right.

Thinking possibly 30 C, 25 S, 10 I, 35 G - or something like that.....