Q. Everyone I work with seems to hold the same opinion, that after retirement all TSP monies should be left in the G fund throughout retirement. Is this a pretty standard opinion everywhere, or just where I work?
A. I can’t tell you what everyone else thinks, but I can tell you that I’ve never had a single client that was willing to proceed with a plan that included a an allocation of more than 50 percent of their entire investment portfolio in the G fund. They either can’t afford to live with such a constraint, or they were rich enough not to have to.
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There will always be those who are so risk-adverse that they would have invested in G funds throughout their career. While they may point with pride at its “above water” performance in recent months, the fact that it remains the lowest priced option reflects its dismal long-term performance. If the basic “L-fund” option is too dicey as a retirement option, I hope they will be able to maintain their “frugal” lifestyle in the future; if we ever get some serious inflation, they will need it.
7+ years in the Navy, have maxed out TSP since year 3 and currently have over $110K in TSP. I have always kept ~50% in G fund and reallocated based on market conditions. It is easy to follow the herd but the smart folks go the opposite direction. In 2008 most lost 30-40% if they were risk heavy in CSI. I lost 1.78% cuz most was in G. In 2009, I made 8X what I lost in 2008 cuz i started to move things away from G when market was down big. You have to be active with TSP unfortunately and if you can’t tolerate big declines, being in G fund is not a bad idea.
Now I’m no financial wizard, but it looks like to me those days are gone when you can rely on the stock market to go up over time. Those of us who aren’t rich can’t afford NOT to put everything in the G fund.