50% of TSP participants are in the G Fund

[misty2009]

@nolongerdivided What vanguard funds are you in that charges .35? Is it a managed fund? I'm looking at the average cost of ETFs and it's .08. If you are paying .35 at vanguard it's too much.

 

[resjudicata]

@nolongerdivided The tax drag on a taxable account due to dividend distributions and any sales have an effect on total returns, and a TSP would not have this problem. It all grows tax free and is tax free on withdrawal for Roth. That right there makes it better than a brokerage IMO.

 

[charl]

@resjudicata almost all my dividend for a given year are from my REITs not my total market index. so unless you shoot for dividend indexes they shouldn't even be considered as real taxable worries.

 

[iamdaniel]

@jose96 It would be interesting to see this correlated with age. I'm guessing all the retired folks are in G. It is also curious that 2050 is by far the most popular lifecycle fund.

 

[pilsung]

@iamdaniel At least when I set up TSP the default was L2050.

 

[iamdaniel]

@pilsung Same, maybe that's the jump in people from when that became the default.

 

[burl]

@iamdaniel 26% of the DoD is ages 26-35. So to me having 26% in 2050 cycle seems reasonable.

 

[dausman23]

@iamdaniel Until the end of last year, that was the furthest option. I'm assuming most people would switch to the new ones, but haven't checked since they came out.

 

[dove1]

@jose96 "Think of how stupid the average person is, and realize half of them are stupider than that." -George Carlin

 

[mm1992]

@dove1 On the other hand at a certain deviation those people aren’t participating in society in any meaningful way. And the army moves that deviation closer to the mean anyway.

 

[tlotw]

@jose96 I was thinking about this yesterday. Too many service members are afraid of stocks because of risk, yet we do risky jobs. We mitigate risk in our jobs to make them less risky. You can also mitigate risk to make stocks less risky as well.

The first way to mitigate risk in stocks is to have an emergency fund. If the stock market is down and you need money at the same time, then use the emergency fund instead of liquidating stocks at a loss. Having a low risk pot allows you to have a high risk pot after it.

Second way to mitigate risk is to invest long term. TSP is a retirement account so it is forcing you to invest long term. G fund will never lose you a numerical amount of money, but it still without risk. Right there in the disclosure it says its susceptible to inflation risk. US common stock is historically proven to be the best hedge against inflation.

Lastly, the TSP forces you to dollar cost average by contributing every two weeks. Dollar cost averaging is historically proven ti reduce your risk in stocks.

Long story short, the mechanics of the TSP reduces your risk in 2 of the 3 major ways to do so. By having an emergency fund and no high interest debt (over 4.5%), you are mitigating the final piece and should be invested in the stock based funds (C/S/I).

 

[soldier149]

@jose96 You gotta think about all the people in the military that are getting automatically enrolled into the TSP and having that 1% contribution to the TSP going to G fund
And all the people who have been putting money (usually 10% of pay) into the TSP thanks to their admin who set up their contributions but never logged into the TSP account to change their funds to C S or L funds
That statistic doesn’t surprise me at all honestly Im surprised its not more based off the amount of people I’ve met that have been contributing for year but never changed where their money goes
Met an E7 last month who had been contributing (10% base pay) for 19 years unknowingly into the G fund

 

[kitty346]

@soldier149 The default TSP Fund for BRS participants is an age appropriate L fund.

 

[soldier149]

@kitty346 Damn didn’t know that changed
Good to know

 

[resjudicata]

@soldier149 I’ve encountered this quite often as well. Sat down with plenty of sailors towards the end of their 20 years for them to realize they have been in the G-fund the entire time. Also had a few who thought they switched out of the G fund only to realize they did a one time interfund transfer but didn’t redo their asset allocation. So they moved like 10k into a C fund but then another 15 years of G fund contributions.

 

[tlotw]

@resjudicata Yea, that does confuse a lot of people. It’s like a 3 part ordeal. First is contributing percent on mypay, then next is how the contributed money gets in invested. Third is redistributing what is already invested if applicable.

 

[resjudicata]

@soldier149 Most of people re lazy

 

[holywalk]

@jose96 I wonder what this is encompassing. Like does having 1% of your portfolio on the G fund count as being "in" the G fund? Same thing for S and I, as those are shockingly low as well.

 

[nairna]

@holywalk I'm in that boat, I had money in the G fund from when I first commissioned but most of it now goes to C or S and some to L2050.

 

[resjudicata]

@jose96 i'm not even a little surprised you don't know how many people i've suggested that they should change their tsp holdings for them to agree and then not do it. most people basically ignore money it baffles me.