I am 45 years of age and have just started a new job with the government. They offer a Thrift Savings Plan with various investment funds. They offer the following investment funds;G Fund Government SecuritiesF Fund Fixed Income IndexC Fund Common Stock IndexS Fund Small Cap Stock IndexI Funds International Stock IndexI have stated out with 45% in G Fund; 40% in C Fund; 10% in S Fund and 10% in I Fund. Is my contribution allocation a sound one? Comments please.
Greetings Dawson1473,I have worked for the government and contributed to TSP for several years. Your allocation is not particularly something someone else can tell you is a sound one without knowing a few more things about you.- When do you plan to retire?- How much risk are you willing to take with your TSP money?- Do you have any other investments?- How much are you putting into the program?From what you've written so far it appears that you are taking a very conservative approach with this money. That is fine if that is what you want, but it is difficult for someone else to judge that without knowing at least a little bit more about your investment goals.CalimanDC
Dawson,It's kind of hard to tell since your allocation adds up to 105%.But no matter how you adjust for that 5 %, it looks pretty balanced as a conservative portfolio.Cheers,Steve
As a couple other people have commented your goals and risk level have a good bit to say about what funds to choose. I am 54 and my choices are: C=40%, S=20&%, I=20% and G=20%. I assume, like you?, that F is to be avoided currently. I expect to retire in the next two or three years. As you are younger you might want more of I and S and less of G. G is very safe and if you really expect the overall market to implode then G is the place to be. But that is too conservative to me. And as you get some inflation adjusted pension (FERS and not CSRS?) you have essentially decent bond coverage and a basis to take more risk. If the market tanks you will like your G fund. One fellow at work has 100% G and laughed all the way through the 2000-2003 market downturn, but that seems like too little risk for me. If the US market tanks and not the world market then the I fund will look very good. I also have some other investments in RothIRAs, other IRAs and some DRIP funds.
Caliman, Thanks for your input. The answers to your questions are as follows;- I plan to retire at or about 65- I want to take a medium risk with my TSA money- I have a 401(k)with a previous employer that I plan to rollover (58k)- I currently putting 7% + GOV 5%I realize that I have been very conservative in the past, however, now I need to take more risk given my age (44)Thanks again ! I thing that I'm going to benifit with Fools.comMichael D-
I have stated out with 45% in G Fund; 40% in C Fund; 10% in S Fund and 10% in I Fund. Is my contribution allocation a sound one? Comments please. I'm afraid I have to repeat the basics of my last post--you did not mention if this is your only investment/retirement account, or if you have other accounts, and what your allocation is in all other accounts. I never look at my investment allocations on a "per account" basis, but on a total portfolio basis. I maintain an Excel spreadsheet that combines the holdings in all my accounts into one portfolio.On a total portfolio basis (if this is your only account), 45% in G Fund sounds very high for someone your age, while 10% in both the S Fund and I Fund sounds too low. This is only my opinion and worth every penny you paid for it ;-)You might want to consider reading William Bernstein's "The Four Pillars of Investing" for explanations and suggestions of different portfolio allocations.2old
If the market tanks you will like your G fund. One fellow at work has 100% G and laughed all the way through the 2000-2003 market downturn, but that seems like too little risk for me.I laughed too, but I had actually put my finance degree to work and socked it all into the F fund, which did nearly twice as well as G. Great fund for a down market (all equity funds were down quite a bit those years, inluding I fund). Now I have been allocating more and more to I fund (up to 40% now, with 45% in S and 15% in C). I've been very pleased, considering the limited choice of investments TSP offers. Of course, I am a bit younger and less averse to risk, which is always something to consider.
An interesting 'theoretical' question:Should a US gov. employee invest in US gov bonds?1) If the the US gov was a private corp I would say no. The credit rating of the company and the security of the employee pay is too correlated. Employees should not invest in their own company's securities unless they are given a special discount or they are complelled to as part of a scheme to motivate employees.2) The value of US gov employees salaries and pensions are inversly correlated to US gov bonds. This is because the less US gov employees are paid the better US gov bonds are as an investment since it means the US gov is taking less capital away from the private sector. I frankly have no answer.I think that the stock and international options make the most sense as you will win either through your government pension, or if the 'Argentina' scenario occurs your pension will be disappointing but your investments will work out better. You may be surprised at what it would cost to purchase an annuity that pays what your pension does. You may already have hundreds of thousands of US$s invested in US bonds.
CalimanDC,I just read your response to Dawson1473. I too contribute to the TSP. I'm 48 years old and currently invest the max which is $539 a month with the govt matching around $245. I currently have around $110,000 in TSP. I had all of it in the C fund for a long time until the new funds came available. I just made an adjustment to 60% in the C fund, 20 in the I fund, and 20 in the S fund. I will probably work another 4 years. I don't plan on using the TSP until required to do so. I still have 10 years before I use this money. I currently receive a monthly pension and I also have around $70,000 that I have put in CDs.My question is: Am I being to risky with the TSP?
I do not believe you are. Since you say that you will not use the TSP money until required to do so, and you are currently only 48, you have a long time until you are required to do so. I would use that time to invest aggressively to maximise the amount you will have at the end of this whole process. Maybe, in a few years, reassess how aggressive you want to be, possibly pulling back some from the S and I funds, but until you see your need to touch this money on the ten year horizon I would keep it going strong. Just my 2 cents though.Caliman
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