Recomendations to allocate TSP contributions

2013-11-05T18:24:57-05:00

Response by CPT Private RallyPoint Member made Nov 5 at 2013 7:32 PM

2013-11-05T19:32:20-05:00

Your retirement is important and much like your career it comes down to you. My advice would be to not invest in anything you do not have a basic understanding of. In the case of the TSP look at the various funds, and their performance to date, also consider how much risk you are willing to take. Diversity is also important so you should spread it across at least a few funds.

Response by MAJ Private RallyPoint Member made Nov 5 at 2013 8:39 PM

2013-11-05T20:39:07-05:00

It depends on what type of investor you are. Active, semi-active or hands off. I am a hands off investor so I like the L 20 options. Since I plan to retire in 20 to 30 years I put it all in L 2040 and it will automatically allocate my funds more aggressive now and less aggressive as your retirement time gets closest.

Response by SSG Private RallyPoint Member made Nov 6 at 2013 6:20 PM

2013-11-06T18:20:48-05:00

I've put 10% of my base pay into my TSP and have been playing it safe because I'm still pretty new to investing. I running a G 40% F 23% C 23% S 7% I 7% allocation. But from what I've been observing the S and I funds have been doing pretty well these past 6 months. My suggestion play it safe until you get comfortable and monitor which have stable returns.

Response by MAJ Private RallyPoint Member made Nov 6 at 2013 8:47 PM

2013-11-06T20:47:18-05:00

SPC Lopez, as I tell my young Soildiers. Diversification is the name of the game... I recommend that not limiting your to TSP or 401k contributions. If on average you gain 8% to 10% per year but inflation increases at 2% to 3% per year it will only be a 6% to 7% return on an investment.

Consider investing in your self (increase knowledge to increase earning power), investing in a business (franchise, online business, rental property, etc.) or developing strategies to develop multiple streams of income.

When I was not allowed to drill this past October and was furloughed from my job, I had pece of mind knowing that I still had some rental income coming in. Having just one source of income is a big risk.

Response by Cpl Ray Fernandez made Nov 6 at 2013 9:29 PM

2013-11-06T21:29:39-05:00

Balance your investments allocate some to high yield, some to stable yields, and savings, also if possible gold or silver would also be a good choice depending on the current price as it can be a good way to counter a weak dollar/inflation. Also look at how much you will need to retire comfortably. If you plan to retire from active duty, factor in that income as well to see calculate how much it will cost you to continue the lifestyle that you want. Like CW4 Gary S. said put about 10% of your income and special pay towards your investments and savings. Follow economic news, but don't let the short term news make you panic, the markets have their ups and downs but the key is planning long term. If you want to educate yourself more on personal finance and investing I'd recommend books by Dave Ramsey, and if you go to his website there are many books from other people that will help you build wealth. Don't be afraid to ask people you know who have successfully built their retirement plans for advice and suggestions.

Response by SSG Private RallyPoint Member made Nov 6 at 2013 10:18 PM

2013-11-06T22:18:46-05:00

Thanks. Actually I am Reservist. As civilian I am newly federal employee so I have the match up contribution too and it is max out because I still have like 30 more years to retire and I can invest agresive now. I'm just waiting for the TSP account stuff so I can change the allocation because it is automatically into G Funds.

Response by LTC Mel Magsino made Nov 11 at 2013 12:49 AM

2013-11-11T00:49:48-05:00

As a rule of thumb for contributing towards retirement investments, one needs to do the following:
1. Contribute up to the match for your TSP (if a civilian government employee) or your 401k or 403b (for non-profits)
2. Fully fund your IRA (Traditional or Roth IRA) up to $5,500 this year and for 2014 as well
3. Contribute up to the annual maximum of $17,500 (beyond the employer match) towards your TSP/401k/403b. Note that uniformed service members can contribute up to a maximum annual additional limit of $51,000 with tax-exempt contributions made to their TSP accounts while deployed to a combat zone
4. If you have more money to contribute outside your tax-advantaged accounts, then consider contributing to low cost well diversified mutual funds or ETFs (highly suggest Vanguard funds like Total Stock Market or Total International). Investment Costs/expense ratios matter!

With regards to your specific question about which TSP fund to invest in, as many have said, it all depends on your time horizon and your risk tolerance...I initially started out with the C Fund (Large Cap) then as I got close to retiring from active duty, I switched to Lifecycle 2030 to reduce some risks. Lifecycle funds rebalance between the C, S, F, I, and G Funds in relation to your time horizon. It all depends on how comfortable you are with managing your own asset allocation...if in doubt, I would suggest a Lifecycle fund.

The important part is that you started contributing to your TSP account (quite possibly the world's lowest cost retirement investment vehicle) and can harness the power of compounding. Sadly, as of June 2013, I read that only about 40% of active duty service members take advantage of the TSP.

For additional reading (in addition to the TSP website), I suggest the following:
http://www.bogleheads.org/wiki/Military_finances
http://themilitarywallet.com/category/tsp/

Thrift Savings Plan - The Military Wallet

One of the biggest financial decisions military and government retirees face is what to do with the funds in their Thrift Savings Plan (TSP). Participants in the TSP have multiple options when they le...

Military finances - Bogleheads

To assist in the education of U.S. military personnel on financial topics, this article departs from the wiki's policy of neutrality. Please see forum discussion: Military Investing

Response by CPT Brian Willey made Nov 20 at 2013 7:47 AM

2013-11-20T07:47:36-05:00

Dave Ramsey recommends C Fund 60%, S Fund 20% and I fund 20%. He has a conservative, tortoise-always-beats-the-hare approach to finances and investing and has done a lot of work with military personnel. One of his main messages is, as many here have stated, never to buy or invest in anything you don't understand. His website has several tools, calculators, videos and blogs to help sort through things and make a good decision for yourself. FYI, the rate of return for the past 12 months with that mix (CSI 60/20/20) has been 25.67%. That is, of course, no guarantee of future performance. Always do your homework, and best of luck!

http://www.daveramsey.com

Dave Ramsey Homepage

New York Times best-selling author and radio host Dave Ramsey is America's trusted voice on money. Learn how to budget, beat debt, and build a legacy with Dave's proven plan.

Response by SFC Private RallyPoint Member made Feb 15 at 2015 1:36 PM

2015-02-15T13:36:56-05:00

SSG Private RallyPoint Member When I just joined the Army, I allocated about 30-40% of my base pay to TSP. As for allocation to different funds, there are different schools of thought on it and they generally support the same scheme. For me, I invest mostly on small cap and international and a small percentage on common stock as my "fixed income", 45% 45% 10%.

I would also suggest you to explore the world of investment such as commodity, bond, call option, short selling, and so on. You don't have to participate, but knowing what is out there makes you a better investor.

You can also set up your own IRA and regular investment account. This will give you more control on what to invest. You can also see how well your own investment performance measuring against TSP's.