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Federal employee and I have a TSP, which is the equivalent of a 401K.
As of today I have 100% of my allocations in the L 2050 fund and I'm happy with it. I like how it is diversified. However, I am wanting to change to the C and S funds. Maybe do something like 60% in C and 40% in S.
I'm 34, I have 6 years in as a federal employee and plan to work 24 to 30 more years. I started in 2010 with 5% contribution in G (and 5% agency matching) but in 2015 I decided to get serious about the TSP and changed my contribution to 12%, then to 15% and just last week decided to changed it again to 17%. I'm at GS-9 step 1 so I will stay at 17% for a while until I get a GS-11/12 promotion and then I will max out to $18,000. With C and S I will have more gains but aware that it goes up and down a lot. With the L 2050, I do not like how it has some in G and F. That is too safe and no reward. Also, if I change 100% of my allocation to C and S, should I transfer all of my money to C and S as well or just leave it in L 2050?
Thoughts?
Here's more information on the fund options in case you need the information.
The L2050 fund is fine. Just leave your money alone. If you want to focus on something, focus on growing the gap between what you earn and what you're able to save or invest (i.e. either earn more or spend less--or both). A high savings rate is actually more important than a percentage point or two's difference in returns (if you manage to get such an increase in returns at all).
First, max out your contributions now!!!! If you have to cut expenses to do so, then do that. Also, consider your tax break when contributing more to reduce the pain.
Second, I am not a fan of the life cycle funds.
Move to the C fund with some in G and F. Maybe, 80% C and 10%G and F. Almost no one should be 100% in stocks.
I think you need to finesse your plan a bit.
Assuming due to your age, you are in the FERS retirement plan. That means your pension will be 1 part social security and 1 part however you collect your TSP plan whether through an annuity or withdrawals.
You need to bone up on what you will collect from social security and how much income that will provide you in order to understand what you need to collect from your TSP account or any other sources to have an adequate retirement income. How dependent you will be on your TSP account should inform the level of risk you are willing to take with regards to investing it.
I assume you are not eligible for a deductible IRA, but you might want to also look into contributing money now or later to a non-deductible IRA and then backdooring it to a ROTH IRA for future non taxable income in retirement.
@OP.
I am also invested in 2050 life cycle fund. I dont know much about investing, for me its balanced enough. Right now its 90% stocks may be but by the time you retire you ll be invested in bonds for the most part.
There are only 5 options, not sure why you would choose to only diversify with 2. I don't honestly know how this compares to the L2050 at the moment, but i am about your age and have it:
50 C
15 S
15 I
15 G
5 F
(so 80% stocks)
And $12,000 in contributions is fantastic on a GS-9 salary!!
One other question is whether you have any in Roth, or are you in straight TSP (or a mix)? You'll not get the reduction to your current taxes, but you can switch more to regular TSP later when you may want/need that income reduction for income tax purposes while you are working at a higher grade. Roth gives you the same choices (I think), but the Roth distributions will be tax-free when you withdraw them. Although you are looking at your investments for returns, keep in mind that after 30 years when you retire, your FERS pension will be at least subject to federal taxes and probably state taxes (depending where you end up), probably your Social Security will also, so having a tax-free income stream available may come in handy, especially if tax rates rise in the future.
All that being said, now is the time for you to be as aggressive as you are comfortable with, as there is plenty of time for recovery. Ten years out from retirement you want to really reassess, and then probably five years out. There's nothing wrong with having a percentage in the safe zone (G), but down the road you will probably regret being too safe. There is nothing wrong with you making your own "adjusted L2050" - just strip out the F or parts you don't want. Keep an eye on it, but don't fiddle too much. You really do want to max out your contributions as soon as possible, though... having your retirement money disappear from your check before you ever see it is optimal - you adjust your lifestyle to that more easily and it really becomes pretty painless after the initial paychecks.
The MOST important thing is not to panic when the hits come... take the long view. I didn't look at my TSP balances for almost two years when they took the hit back in 2008 - and things recovered in spades.
Check out the National Institute of Retirement Planning website, too... they have some good information for federal employees - you are still a ways away from retirement, but they give you an idea of things early enough to possibly avoid later pitfalls.
I'm 10% G, 30% each for C/I/S for no other reason than easy math of splitting the stocks into 1/3 each.
Some might not like it but I don't mind international, and the small fund doesn't bother me either.
fed soup has a good argument of using roth TSP, pension is taxed, pension + social security + RMD = larger tax bill. If you don't mind it, then TSP is still good. If you mind it, then roth TSP.
There are only 5 options, not sure why you would choose to only diversify with 2. I don't honestly know how this compares to the L2050 at the moment, but i am about your age and have it:
50 C
15 S
15 I
15 G
5 F
(so 80% stocks)
And $12,000 in contributions is fantastic on a GS-9 salary!!
The L2050 fund has a mix of all of the above 5 funds. It is designed to be an all-in-one fund. So it already is diversified. That's the whole point of owning it. It's diversified and gets more conservative with time.
Federal employee and I have a TSP, which is the equivalent of a 401K.
As of today I have 100% of my allocations in the L 2050 fund and I'm happy with it. I like how it is diversified. However, I am wanting to change to the C and S funds. Maybe do something like 60% in C and 40% in S.
I'm 34, I have 6 years in as a federal employee and plan to work 24 to 30 more years. I started in 2010 with 5% contribution in G (and 5% agency matching) but in 2015 I decided to get serious about the TSP and changed my contribution to 12%, then to 15% and just last week decided to changed it again to 17%. I'm at GS-9 step 1 so I will stay at 17% for a while until I get a GS-11/12 promotion and then I will max out to $18,000. With C and S I will have more gains but aware that it goes up and down a lot. With the L 2050, I do not like how it has some in G and F. That is too safe and no reward. Also, if I change 100% of my allocation to C and S, should I transfer all of my money to C and S as well or just leave it in L 2050?
Thoughts?
Here's more information on the fund options in case you need the information.
There are only 5 options, not sure why you would choose to only diversify with 2. I don't honestly know how this compares to the L2050 at the moment, but i am about your age and have it:
50 C
15 S
15 I
15 G
5 F
(so 80% stocks)
And $12,000 in contributions is fantastic on a GS-9 salary!!
Quote:
Originally Posted by mysticaltyger
The L2050 fund has a mix of all of the above 5 funds. It is designed to be an all-in-one fund. So it already is diversified. That's the whole point of owning it. It's diversified and gets more conservative with time.
I think it was relative to the OP who is thinking about leaving the set and ignore L fund and choose 100% mostly domestic stock portfolio of the C and S funds. Maybe because international funds have been down in the last reporting cycle the I fund was left out? That is the strength of the L fund, it takes out your emotions of seeing the up and downs of the funds relative to each other out of the mix and you don't need to go through the annual, maybe quarterly or more often re-balancing
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