best TSP fund distribution for federal retirement
March 4, 2019 1:44 PM Subscribe
To which funds should I allocate my TSP contributions for long-term, hands-off investing?
I started a federal job awhile back and am making per paycheck contributions that will put me at the yearly TSP limit. I don't anticipate retiring for at least 20 years, probably 25+. This is my family's primary source of retirement savings, and will be for the foreseeable future. I currently put all my contributions into the C fund, but am considering splitting between the C, S and I funds. I will consider switching to more conservative options when I am 5-10 years away from retirement, but for now I am comfortable with an aggressive approach. I do not think about my TSP balance on a regular basis and don't have plans to reallocate based on my perception of where the market is going (I held through the 2008 bear market).
I understand the basic differences between the C, S and I funds, but don't really have a coherent way of splitting funds other than choosing round numbers like 50/25/25. Are the S and I funds supposed to be hedges against C, or do they just try to provide greater access to smaller companies with more growth potential than the S&P?
I started a federal job awhile back and am making per paycheck contributions that will put me at the yearly TSP limit. I don't anticipate retiring for at least 20 years, probably 25+. This is my family's primary source of retirement savings, and will be for the foreseeable future. I currently put all my contributions into the C fund, but am considering splitting between the C, S and I funds. I will consider switching to more conservative options when I am 5-10 years away from retirement, but for now I am comfortable with an aggressive approach. I do not think about my TSP balance on a regular basis and don't have plans to reallocate based on my perception of where the market is going (I held through the 2008 bear market).
I understand the basic differences between the C, S and I funds, but don't really have a coherent way of splitting funds other than choosing round numbers like 50/25/25. Are the S and I funds supposed to be hedges against C, or do they just try to provide greater access to smaller companies with more growth potential than the S&P?
For long-term, hands-off investing, choose the L 2040 lifecycle fund, which assumes retirement in 2040. Done.
It's not necessary, but you could also take a look at the underlying asset allocation of the lifecycle funds and decide if your risk/return preferences align with the recommended ones. If you want a bit more risk and more expected return, you could allocate some or all to the L2050, or some to the L2030, or even most to the L2050 and a little to the C fund. The big advantage of the L funds is that you don't have to worry about rebalancing.
posted by Mr.Know-it-some at 2:22 PM on March 4, 2019 [1 favorite]
It's not necessary, but you could also take a look at the underlying asset allocation of the lifecycle funds and decide if your risk/return preferences align with the recommended ones. If you want a bit more risk and more expected return, you could allocate some or all to the L2050, or some to the L2030, or even most to the L2050 and a little to the C fund. The big advantage of the L funds is that you don't have to worry about rebalancing.
posted by Mr.Know-it-some at 2:22 PM on March 4, 2019 [1 favorite]
I concur with Mr. Know-it-some. I've been a federal employee for the past 23 years, and my TSP account is currently invested in one of the lifecycle funds. When I first started out, I handled my own asset allocations and rebalanced my portfolio once or twice a year. However, once the lifecycle funds began I switched to the L2020 in order to have a more hands-off approach.
posted by Roger Pittman at 6:36 PM on March 4, 2019
posted by Roger Pittman at 6:36 PM on March 4, 2019
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The I fund is there if you want it. People have different opinions about how much international stock exposure they are comfortable with. See also the Bogleheads article on domestic vs. international investing.
You would allso probably do fine to just invest in one of the Lifecycle (L) funds with an appropriate retirement target date.
posted by AndrewInDC at 2:19 PM on March 4, 2019 [2 favorites]