Anonymous
12/16/2014 16:42
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:
Well, now you are talking about timing the market rather than choosing an investment allocation. If you think you can time the market and move in and out of stocks and bonds to make more money, fine. But for everyone who gets this right there is someone who gets this wrong - every buyer has a seller. Many people who went into bonds when the market crashed missed out on the recovery.
Every investment allocation necessarily has a market timing element even if the notion behind has no intention to try to time the markets. I agree that trying to time markets is a loser's game.
But investment allocations can change over time (long-term, not jumping around to the next hot thing) based on the reality of analyzing developing facts regarding the entire economic picture. Trying to distinguish between those two when the purpose behind the allocation decision is not to time markets is specious.
Anonymous
12/16/2014 16:38
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:NP. I think PP meant FERS.
Yes I was talking about the FERS annuity. When I retire I'll get 42% which is actually close to 50% since there are no payroll taxes out of it. Then there is social security. That's 2 separate fixed income retirements. The idea that I would be using the G fund seems a bit out there. I can survive the drops in the market. I won't need to withdrawal at retirement anyway.
Just as a real-world example ... by heeding an advisory recommendation to move things out of equity funds prior to the '08 dive, we averted a loss of approx. $170-200k in our TSP account had we left it fully in equities.
With the growth in the account from '09-14, it was up more than $250k in that period. Losing approx., say, 30% of the growth of $180k plus the actual loss of the $180k that was averted, that is $200k that is in our account today because there was a reallocation to about 55%G in '08 before the big dive. That's the difference between a $800k TSP balance and a $550k balance = real money to most people.
So it can make a significant difference. I've been retired for 2 yrs. and won't have to touch the TSP account for years and have other assets so for us it's not so critical, but if your TSP account performance matters, as it does to many, many people, going all in on equities and just riding it out is a proven less than optimal (to put it mildly) way to go.
2008 won't happen again unless you're expecting another real estate crash nationwide. [..]
Oh, really?
What brand crystal ball do you use?
Kind of ironic that you are claiming this within days of Congress reopening the door to Citi & others' credit default swaps that helped prime the failure pump for '08. I realize that you're just stating your opinion but the notion that is has any sense of certainty or factually or analytically based validity is ridiculous.
Anonymous
12/16/2014 16:35
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:NP. I think PP meant FERS.
Yes I was talking about the FERS annuity. When I retire I'll get 42% which is actually close to 50% since there are no payroll taxes out of it. Then there is social security. That's 2 separate fixed income retirements. The idea that I would be using the G fund seems a bit out there. I can survive the drops in the market. I won't need to withdrawal at retirement anyway.
Just as a real-world example ... by heeding an advisory recommendation to move things out of equity funds prior to the '08 dive, we averted a loss of approx. $170-200k in our TSP account had we left it fully in equities.
With the growth in the account from '09-14, it was up more than $250k in that period. Losing approx., say, 30% of the growth of $180k plus the actual loss of the $180k that was averted, that is $200k that is in our account today because there was a reallocation to about 55%G in '08 before the big dive. That's the difference between a $800k TSP balance and a $550k balance = real money to most people.
So it can make a significant difference. I've been retired for 2 yrs. and won't have to touch the TSP account for years and have other assets so for us it's not so critical, but if your TSP account performance matters, as it does to many, many people, going all in on equities and just riding it out is a proven less than optimal (to put it mildly) way to go.
Well, now you are talking about timing the market rather than choosing an investment allocation. If you think you can time the market and move in and out of stocks and bonds to make more money, fine. But for everyone who gets this right there is someone who gets this wrong - every buyer has a seller. Many people who went into bonds when the market crashed missed out on the recovery.
No, you're wrong there. You again describe something that is not what I'm describing.
Every method of allocation is "market timing" in some way but I reject the common perception of moving around frequently to time the market.
What I'm talking about is the model I mentioned above, see tsppilot.com (again, I have no affiliation other than as a paying customer who's done well enough in 15 yrs with my TSP account to retire at 58), which makes infrequent adjustments based on an analysis model that has worked over time (contrary to any "market timing" claim I've ever seen).
You may call that "market timing" -- but it's nothing like any market timing model I've seen. In the larger sense it is "market timing" just as any decision, including choosing to hold no G fund, etc., is a "market timing" call. The only way any of us never engages in market timing is to select one allocation model, set it & forget it. That's a pretty weak investment strategy, as time has proven.
Anonymous
12/16/2014 16:25
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:The L funds are a touch more conservative than my own preferences, so I've picked one for the decade beyond when I would potentially retire.
Me too.
Anonymous
12/16/2014 16:25
Subject: Federal employee, how do you choose your TSP investment?
I understand the value of protecting some of the gains with the L fund but it's a really bad time to put money (anything) into F. That thing could be a loser for the next 5 years as interest rate eventually (?) rise.
Anonymous
12/16/2014 16:13
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:Anonymous wrote:Anonymous wrote:NP. I think PP meant FERS.
Yes I was talking about the FERS annuity. When I retire I'll get 42% which is actually close to 50% since there are no payroll taxes out of it. Then there is social security. That's 2 separate fixed income retirements. The idea that I would be using the G fund seems a bit out there. I can survive the drops in the market. I won't need to withdrawal at retirement anyway.
Just as a real-world example ... by heeding an advisory recommendation to move things out of equity funds prior to the '08 dive, we averted a loss of approx. $170-200k in our TSP account had we left it fully in equities.
With the growth in the account from '09-14, it was up more than $250k in that period. Losing approx., say, 30% of the growth of $180k plus the actual loss of the $180k that was averted, that is $200k that is in our account today because there was a reallocation to about 55%G in '08 before the big dive. That's the difference between a $800k TSP balance and a $550k balance = real money to most people.
So it can make a significant difference. I've been retired for 2 yrs. and won't have to touch the TSP account for years and have other assets so for us it's not so critical, but if your TSP account performance matters, as it does to many, many people, going all in on equities and just riding it out is a proven less than optimal (to put it mildly) way to go.
2008 won't happen again unless you're expecting another real estate crash nationwide. I got really lucky because we took a 50k loan for a house right before the crash. Sometimes it's better to be lucky than good.
Anonymous
12/16/2014 16:12
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:C 65%
S 20%
I 15%
done.
I do 40/40/20 myself. I used to do the L fund but I'm find putting everything in the market. As a federal employee you should be able to absorb the risk because you have a pension which is like a giant bond. If half your retirement is already in a bond why put anything in G?
I'm not an expert on F but it's my understanding that it's only usful to invest in when interest rates are high. While rates are low, corporate bonds bought are going to have little profit.
Interesting analysis but I don't agree with it at all. Your "pension" that you refer to is, I assume your TSP annuity? That's only part of your retirement plan and getting a strong return on your TSP account part is critical to a successful retirement scenario, so the idea that you can absorb the risk of being improperly allocated is misguided IMO, especially later in your career. Risking a 20%+ loss in a bad year on a TSP account of, say, $800k (not unheard of) fully invested in equities can really put a crimp in your retirement financial picture.
Do you understand that the G fund is not a bond fund? I don't understand why you equate it with bond investments (which are the F fund). In fact, the G fund is the lowest cost, highest return money market type fund you can find, that's where you want to park the cash portion of your portfolio IMO because whatever the interest rates are, you'll get more in the G fund than from Vanguard Prime or Fidelity Cash Reserves, etc. You're not going to grow that part of the portfolio much right now but it is a downside cushion. The G fund & bonds are apples & oranges.
So, imagine your ideal allocation is a split between bonds and equities. The idea is that the FERS annuity mimics the features of the bond component of your ideal allocation, as it provides a fixed nominal return. So when interest rates fall, the value of the FERS annuity increases just like bonds would.
If you set your allocation in TSP according to the norms for people who don't have an annuity component, you will end up over-exposed to bond-like instruments and under-exposed to equities, and generate a lower return than you should.
Perhaps, that's an interesting perspective ... but I don't think that's what I'm saying.
For example, I didn't say to "set your allocation in TSP according to norms for people who don't have an annuity component". I agree you have to factor that in. But in the end it's all one pot of money (income streams) so you do have to consider how to protect each on its own as well as see the big picture, and if you go overboard with risk in one leg, you may jeopardize the ultimate goal of ensuring that they all -- together -- will meet your goal.
Anonymous
12/16/2014 16:10
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:Anonymous wrote:Anonymous wrote:NP. I think PP meant FERS.
Yes I was talking about the FERS annuity. When I retire I'll get 42% which is actually close to 50% since there are no payroll taxes out of it. Then there is social security. That's 2 separate fixed income retirements. The idea that I would be using the G fund seems a bit out there. I can survive the drops in the market. I won't need to withdrawal at retirement anyway.
Just as a real-world example ... by heeding an advisory recommendation to move things out of equity funds prior to the '08 dive, we averted a loss of approx. $170-200k in our TSP account had we left it fully in equities.
With the growth in the account from '09-14, it was up more than $250k in that period. Losing approx., say, 30% of the growth of $180k plus the actual loss of the $180k that was averted, that is $200k that is in our account today because there was a reallocation to about 55%G in '08 before the big dive. That's the difference between a $800k TSP balance and a $550k balance = real money to most people.
So it can make a significant difference. I've been retired for 2 yrs. and won't have to touch the TSP account for years and have other assets so for us it's not so critical, but if your TSP account performance matters, as it does to many, many people, going all in on equities and just riding it out is a proven less than optimal (to put it mildly) way to go.
Well, now you are talking about timing the market rather than choosing an investment allocation. If you think you can time the market and move in and out of stocks and bonds to make more money, fine. But for everyone who gets this right there is someone who gets this wrong - every buyer has a seller. Many people who went into bonds when the market crashed missed out on the recovery.
Anonymous
12/16/2014 16:08
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:If you have 20+ years left, you really don't need to put money into G.
probably true today ... just the opposite if you are within 10 yrs of retirement (should be mixing in a good portion of F & G)...
part of the problem/dilemma now is that bond funds are bound to go down as interest rates go up, so a good portion in F is subject to loss of value of principal... The G fund share price is stable (barring calamity) ...
Anonymous
12/16/2014 16:07
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:Anonymous wrote:Anonymous wrote:C 65%
S 20%
I 15%
done.
I do 40/40/20 myself. I used to do the L fund but I'm find putting everything in the market. As a federal employee you should be able to absorb the risk because you have a pension which is like a giant bond. If half your retirement is already in a bond why put anything in G?
I'm not an expert on F but it's my understanding that it's only usful to invest in when interest rates are high. While rates are low, corporate bonds bought are going to have little profit.
Interesting analysis but I don't agree with it at all. Your "pension" that you refer to is, I assume your TSP annuity? That's only part of your retirement plan and getting a strong return on your TSP account part is critical to a successful retirement scenario, so the idea that you can absorb the risk of being improperly allocated is misguided IMO, especially later in your career. Risking a 20%+ loss in a bad year on a TSP account of, say, $800k (not unheard of) fully invested in equities can really put a crimp in your retirement financial picture.
Do you understand that the G fund is not a bond fund? I don't understand why you equate it with bond investments (which are the F fund). In fact, the G fund is the lowest cost, highest return money market type fund you can find, that's where you want to park the cash portion of your portfolio IMO because whatever the interest rates are, you'll get more in the G fund than from Vanguard Prime or Fidelity Cash Reserves, etc. You're not going to grow that part of the portfolio much right now but it is a downside cushion. The G fund & bonds are apples & oranges.
So, imagine your ideal allocation is a split between bonds and equities. The idea is that the FERS annuity mimics the features of the bond component of your ideal allocation, as it provides a fixed nominal return. So when interest rates fall, the value of the FERS annuity increases just like bonds would.
If you set your allocation in TSP according to the norms for people who don't have an annuity component, you will end up over-exposed to bond-like instruments and under-exposed to equities, and generate a lower return than you should.
Anonymous
12/16/2014 16:06
Subject: Federal employee, how do you choose your TSP investment?
OP My eligible retirement date is 2039, I'm in L2040 now, but am thinking of shifting to L2050 and giving it a shot.
Anonymous
12/16/2014 16:06
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:Anonymous wrote:NP. I think PP meant FERS.
Yes I was talking about the FERS annuity. When I retire I'll get 42% which is actually close to 50% since there are no payroll taxes out of it. Then there is social security. That's 2 separate fixed income retirements. The idea that I would be using the G fund seems a bit out there. I can survive the drops in the market. I won't need to withdrawal at retirement anyway.
Just as a real-world example ... by heeding an advisory recommendation to move things out of equity funds prior to the '08 dive, we averted a loss of approx. $170-200k in our TSP account had we left it fully in equities.
With the growth in the account from '09-14, it was up more than $250k in that period. Losing approx., say, 30% of the growth of $180k plus the actual loss of the $180k that was averted, that is $200k that is in our account today because there was a reallocation to about 55%G in '08 before the big dive. That's the difference between a $800k TSP balance and a $550k balance = real money to most people.
So it can make a significant difference. I've been retired for 2 yrs. and won't have to touch the TSP account for years and have other assets so for us it's not so critical, but if your TSP account performance matters, as it does to many, many people, going all in on equities and just riding it out is a proven less than optimal (to put it mildly) way to go.
Anonymous
12/16/2014 16:01
Subject: Federal employee, how do you choose your TSP investment?
If you have 20+ years left, you really don't need to put money into G.
Anonymous
12/16/2014 15:59
Subject: Federal employee, how do you choose your TSP investment?
Anonymous wrote:NP. I think PP meant FERS.
Yes I was talking about the FERS annuity. When I retire I'll get 42% which is actually close to 50% since there are no payroll taxes out of it. Then there is social security. That's 2 separate fixed income retirements. The idea that I would be using the G fund seems a bit out there. I can survive the drops in the market. I won't need to withdrawal at retirement anyway.
Anonymous
12/16/2014 15:53
Subject: Federal employee, how do you choose your TSP investment?
15:43 here. PP was referring to the breakdown of the L funds, which include significant percentages of the G fund. The L2040 fund has 18% in the G fund.