Browsing: return

Variable annuities

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Q. I just retired from government service under CSRS and have left my Thrift Savings Plan alone. My financial adviser, whom I consider a friend, is telling me I need to roll my TSP over into a tax-deferred variable annuity that guarantees a 5 percent return on investment each year even when the market does poorly. He says because of this “guarantee,” I can choose a very aggressive growth portfolio, while not having to worry about the results. He claims my TSP is not protected against losses. I knew that already, of course. It’s with a highly rated company. Fees…

Return on annuity

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Q. What is the percentage of return if I invest the balance of my Thrift Savings Plan account in the annuity provided by TSP? A. The monthly payment depends upon your circumstances and the interest rate environment when you purchase the annuity. You can run a quote at www.tsp.gov. The return on investment from a TSP annuity can’t be known in advance, however. You’ll have to wait until the payments stop to figure it out. To illustrate, what if you buy a single life annuity with no refund and then die right away? Your return on investment will be hugely…

TSP allocation

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Q. I would like to know a good allocation of my Thrift Savings Plan funds. I retired a year ago, and I am under CSRS. I have about $140,000 in the F Fund. I am 60 years old and do not need the money as of yet. I am looking for a fairly safe allocation within the funds for a 6 percent to 10 percent return. A. A good allocation will produce the maximum possible expected return in exchange for the level of risk it produces, and there are many such allocations. You should note, however, that there many more…

Return percentage

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Q. Is 9.45 percent a good return? I received my Thrift Savings Plan fourth-quarter statement, and my last 12-month return is 9.45 percent. What is the best distribution as of today for a better return? A. Whether 9.45 percent is good or bad entirely depends upon what you need to achieve your goals. If you only needed 9 percent, then I guess it’s good. If you needed 10 percent, then it’s not so good. If you don’t know what you needed, then you’re feeling your way around in the dark. Guessing which asset allocation will produce a better return starting…

F Fund vs. G Fund

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Q. Your Sept. 24 column in Federal Times made the suggestion to increase allocation in the G Fund at the expense of the other funds, including the F Fund. I have not normally been heavily invested in the F Fund in my 25 years. However, with the F Fund having the second-highest return of any fund since its inception (5.86 percent); that it has never had a negative yearly return; that there is a continually declining performance of the G Fund; and the low probability that interest rates will go up any time soon, I see the F Fund as…

Calculating risk and return

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Q: How does one go about determining the most advantageous proportions of all five funds to achieve one’s expected level of return? And after knowing that secret, how does one know when is the right time to to adjust these proportions? A: I can tell you how I do it in my practice. I know of no better way to do it: We use long-term historical data and some practical knowledge to make assumptions about the expected rate of return, standard deviation of those returns and correlation coefficients for each of the asset types underlying the asset types you’ll be…