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…
Browsing: Lifecycle Funds
Q. In an April 2011 answer to a question about the lifecycle funds, you noted that the Thrift Savings Plan suggests choosing the L Fund that most closely matches your retirement date and putting 100 percent of your money there. You said you recommend investing in the L Fund that most closely matches your life expectancy rather than your retirement date. Why? Isn’t this going to put your money at risk when you’re older and can least afford to be risky with your money? A. This is my default recommendation, and it recognizes the fact that, in most cases, your financial…
Q. I was contributing to the Thrift Savings Plan since 2002, when the program started, until 2009. I don’t contribute now on a monthly basis because I am not a government employee yet. I still put in money from time to time, like rolling over a 401(k) from a previous job. I have close to six figures in my plan. I plan on working for another 20 years, hopefully in the government sector soon. I currently have all my money in the G Fund. I have always been nervous to put money into those other funds. Can you provide me tips on…
Q. Is it possible to look at the historical rates of return of the various Thrift Savings Plan funds and predict an allocation for a nominal return of 6 percent, or am I better off looking into the Life Cycle funds and trying to predict the return from there? (Past performance of the L Fund income just falls short of 6 percent). My goal is to make an average of 6 percent per year on my current TSP balance to reach my retirement goal. A. Yes, it’s possible. But you shouldn’t rely on a prediction based on so little data.…
Q: I truly do not know what I’m doing with my Thrift Savings Plan funds. I’ve been told to divesify them; what exactly does that mean? If you were to look at this breakdown (figures rounded slightly) and know that I won’t retire for 21 years, what recommendation(s) would you make? L 2040 Lifecycle Fund: 74.72 percent of total funds, $21,423; F Fund: 5.33 percent, $1,529; G Fund: 5.28 percent, $1,515; C Fund: 4.91 percent, $1,408; I Fund: 4,88 percent, $1,400; S Fund: 4.88 percent, $1,398. A: Consider the following growth allocation: 55 percent C Fund, 26 percent S Fund,…