TSP fund allocation

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Q. I will have approximately $550,000 in my Thrift Savings Plan when I retire this year at age 60. In addition, I have other investments and will be receiving a federal pension. Using a 4 percent investment withdrawal rate and anticipating future Social Security benefits, my income will exceed expenses by 20 percent, so I may dial back the 4 percent to something less. Considering this and with a willingness to accept a moderate amount of risk, what would be an appropriate TSP fund allocation for a younger retired person?

A. I can’t tell you what is right for you without a lot more analysis and understanding. The exact nature of your financial goals and the timing of cash flows is critical to the decisions you face. It’s kind of like saying your head hurts and asking what you should do. The truth is that you should put the effort into figuring out the right thing to do before you do anything else. Otherwise, you’re just guessing and you’ll pay the price if you guess wrong.

As I have written many times, however, if you don’t KNOW what to do, you should consider choosing the TSP L Fund that most closely corresponds to your life expectancy, or your joint life expectancy if you’re married. This doesn’t guarantee that your goals will be met, however.

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