What is the most beneficial "fund" of the TSP, saying I stay in for 20?

2016-09-10T18:52:58-04:00

I am new to the whole system and inside of my packet was a sheet indicating several different funds and recommended percentages for each based on when you will need the retirement funding back. Has anyone been successful using anything other than the "G Fund"? Being a new TSP contributor, I want to ensure that I am doing everything I can to prepare myself for financial security in the future.

Response by Maj Marty Hogan made Sep 10 at 2016 6:56 PM

2016-09-10T18:56:29-04:00

I always tell new guys before you do anything find out what your risk factor is and go from there. G fund is the safest then the F, then you have most risk in the C,S and I. I would not recommend the life style ones as you don;t control your $$. Baby steps- and ensure you are getting your self paid first as much as you can sock away. Read and educate yourself.

Response by ENS Private RallyPoint Member made Sep 10 at 2016 7:25 PM

2016-09-10T19:25:18-04:00

I have done an uncomfortable amount of research on TSP. If you are staying in for 20, I recommend you stick with the current plan and stay away from the new TSP system. Do not OPT in. If you plan on leaving before 20, you should definitely get into the new system now! There is a 10% loss of pension a year at 20 and 15% loss at 30 between the two if you plan on retiring.

Now, if we are talking funds, the 2050 Lifestyle fund is doing well and is a pretty safe bet. However, I have put all my funds 50/50 between the S and C fund. You can see upwards of a 30% return on these funds, but you can also see major losses. However, over a 10 year period these funds have had a positive overall return of 8% - 10%. Not bad if you consider 2008 was a bombshell and 2013 was an aftershock.

I am putting 45% of my base pay into ROTH TSP* and plan on upping that to 65% once I am out of debt. Maxing out contributions ($18,000 a year or $1,500 a month) for 20 years can earn you $2M if the market is decent. If you max out and serve for 30 years and don't touch it until you're 69.5 and the market averages out at 10%, you are looking at $22M. Realistically, if you're making decent contributions, you will have a great nest egg waiting for you upon retirement.
*Since I am in a lower tax bracket, it is better for me to contribute 100% into ROTH TSP than Traditional as I am being taxes less now than I would be as say, an O4.

Again, if you do not plan on retiring, switch over to the new system in 2017. A free 5% "pay raise" is awesome! You won't have to worry about the 10-15% loss of pension if you don't retire.

Response by SPC Paul Jennings, J.D. made Sep 10 at 2016 7:41 PM

2016-09-10T19:41:19-04:00

There is no one "right fund." It's a question of diversification and risk tolerance. Essentially, you should have a mixture of funds, however, since you only have 4 true funds to choose from-the G fund is a low return no risk fund-it's essentially how much of a stock/bond ratio do you want. Many people default to the 60/40 split, but you're young and won't be touching this money for years so you should be able to tolerate a much heavier stock focus.

The most important thing is to remember is that the TSP, like any retirement account, is a long term investment. The sooner you invest the more the money will grow, and you have to resist the urge to withdraw money during tough times now, and to try to "time the market."

Response by Lt Col Jim Coe made Sep 10 at 2016 9:05 PM

2016-09-10T21:05:06-04:00

Recommend you check out smart401k.com. It's a website run by Financial Engines. They specialize in answering this type of question.

Response by MSgt Michael Bischoff made Sep 10 at 2016 10:48 PM

2016-09-10T22:48:43-04:00

It is safer to play the risky high return stocks will your young. The closer you get to retirement the less risk. I have most in the G fund now after almost 20 years in the TSP with retirement around the door.

Response by LTC John Shaw made Sep 11 at 2016 8:12 AM

2016-09-11T08:12:43-04:00

If your timeline is 20 years choose L 2050 or a mix of 50% C, 20% I, 20% S, and 10% G or F.
You can also call USAA and they will offer free advice on how to setup for their own offering. Equity offers you the best opportunity for long-term wealth

Response by SGT David T. made Sep 12 at 2016 8:27 AM

2016-09-12T08:27:28-04:00

On the TSP website you can run reports on the historical share prices for all funds since the program's inception. I recommend doing that and looking at the line graph. You will see that all funds peak and dip in the same spots. What I do is I go all high risk right now (still early in my career) and when I get into my last 5 I will switch to all lower risk stuff. Maybe not the perfect solution, but it seems to work pretty well for me.