Q. I am 55 years old planning to retire under CSRS in the next year. I currently have approximately $200,000 in TSP using my own distribution choices rather than an L Fund. Although my distribution selection falls between the L 2020 and L 2040 Funds, I am considering movement to an L Fund once I retire. If I understand the TSP descriptions correctly, they suggest I use the L Fund closest to my retirement year (L 2020), but my thought is that I can afford to be a little more aggressive considering I will be receiving a decent pension ($70,000). I believe I read in one of your answers that choosing an L Fund closest to my life expectancy is worth considering, but I can’t find it and would hate to make any decision without a complete understanding of what is best for me. Which L Fund, if any, would you recommend someone in my situation should select?
A. I can’t know what is best for you without the right information, analysis and understanding. If you want to maximize the income that can be produced over a lifetime, however, it’s a safer bet to use the L Fund that most closely corresponds to your life expectancy than to your retirement date. Using the method that the TSP suggests will put a healthy 40-year-old and ill 80-year-old in the same fund if they both retire this year. Not exactly a reliable, or sensible, approach in my opinion.