Goeffrey,
I guess I'm a little late to the party, but I thought I'd post some additional thoughts [in no particular order].
I think you need to decide what your risks are. As Nords so eloquently pointed out with his in-laws example, one of the risks of a all MM, short term CD's, or short term bond portfolio is income risk. This is the risk that your income will decline. Remember that income from MM and ST bonds is much more volatile than longer term bonds, which just lock in income/yields for longer periods of time and decline/increase slower than those of MM and ST bonds.
And like any retiree you've got inflation risk, which is partially mitigated by your FERS annuity and SS.
Since you've got a whole bunch of savings bonds already, you probably have a Treasury Direct account, in which you can buy 2, 5 + 10 year nominal T-notes, and 5, 10, + 20 year TIPS. And it is all for free if you buy them at auction.
Using slightly longer term nominal T-notes [like 5 + 10 yr] and longer term TIPS [5,10,+20 years], you could better hedge income and inflation risk without sacrificing credit quality/risk or increasing expenses. This could be an improvement over an all MM/CD portfolio.
I'd keep that G fund for as long as possible as well. If you do decide to do any stock investing, I'd do it in your taxable account not in the TSP. Better tax advantages for stocks: lower capital gains and dividend taxes, and ability to take capital losses when they occur.
Chances are that you've got rather old I bonds and EE bonds with attractive yields, like near 3% real yields on I bonds. I'd definitely keep those for a long time since you're getting anywhere from 2-4% real compounding tax deferred. Kind of like a zero coupon, tax deferred TIPS.
Another idea is to run some scenarios in Firecalc. You can do things like see if just increasing your stock allocation from 0 to 10 or 20% would increase your portfolio survivability substantially. Looks like it could. You can also see if delaying taking SS would increase portfolio survivability. You can use the SSA's SS Benefit Calculator to get your monthly PIA at various ages and the plug those $$'s and ages into Firecalc.
I realize than many ER's favor a stock heavy portfolio, but given TIPS creaping up to 2.80% real and an expected stock return of say 3-4% real, I find it rather hard to recommend large stock allocations. But that's just me.
Also, is there a reason you have a brokerage acct. Unless you're buying stocks/bonds on the secondary markets [NYSE, NASDAQ, OTC, etc.], you can probably do most of your investing directly through the Treasury or someplace like Vanguard without transaction fees for higher MM yields, ST bond funds, and tax efficient equity funds.
- Alec
