TSP fund allocation

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Q. I am 25 years old, and recently joined the government. It is difficult to fathom retirement at my age, but I understand that I can get ahead by taking time to address my financial planning needs now.

I don’t really have solid retirement goals. Let’s imagine I will retire around 2050. My investments need to provide support beyond any retirement date. I understand the risks associated with investing in stocks vs. mutual funds. I also understand that I can take more risk at a younger age. And I am comfortable taking on risk. After all, we’re only talking about Thrift Savings Plan contributions. I’m also putting money into a Roth IRA and considering a Roth 401(k).

My TSP contributions are allocated according to the default: 100 percent in the G Fund. LifeCycle funds seem to be recommended and preferred by a variety of folks. What do you think about this growth allocation:

25 percent — LifeCycle 2050

25 percent — C Fund

20 percent — S Fund

15 percent — I Fund

10 percent — F Fund

5 percent — G Fund?

A. I suggest that you consider maxing out your tax-deferred TSP contributions before saving anywhere else for retirement, and then fixing your allocation using the beginning allocation for the L 2050 Fund: 44 percent C Fund, 27 percent I Fund, 19 percent S Fund, 7 percent F Fund and 3 percent G Fund. Rebalance your account to this allocation at least once per year but no more than four times per year. I see no reason to mix the L Funds into the allocation.

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About Author

Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

2 Comments

  1. You are 25. I suggest you go 100% into C or S fund. Move out to G when you think the market will take a tumble and jump in when you think it’s at it’s lowest.
    Those are the risks you should be taking. None of the old fashioned Buy and Hold Method. Yes you can argue that this is a long term financial endeaver, but micro managing it will insure you won’t lose as much when stuff hits the fan.

    But I agree, if you are going to diverisfy that much, no need to mix in a L fund.

  2. To me this comment makes little sense:

    “A. I suggest that you consider maxing out your tax-deferred TSP contributions before saving anywhere else for retirement, and then fixing your allocation using the beginning allocation for the L 2050 Fund: 44 percent C Fund, 27 percent I Fund, 19 percent S Fund, 7 percent F Fund and 3 percent G Fund. Rebalance your account to this allocation at least once per year but no more than four times per year. I see no reason to mix the L Funds into the allocation.”

    He’s saying invest in GFCSI funds to mimic the L2050 funds then to ‘rebalance?’ account yearly? If you are going to do this just invest in the L2050 fund 100%. That is what it is already designed to do.

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