Advice/ TSP

[clove2019]

i’m a O-2 with 19 months of service (Active Duty). I currently have 14,000 thousand dollars on my TSP. I’ve been putting 20% of my monthly pay. I’m currently on the “L 2060” fund on a ROTH. I want to maximize the TSP and do as well as possible but I don’t know or understand much of the TSP.

What is your advice for me on the TSP?

 

[kitty346]

@clove2019 What are your financial goals?

Mostly, keep doing what you’re doing. It sounds like you’re doing things right.

Bump the percentage up when you’re able, especially when you get a raise.

If you want to learn more, attend the Personal Finance classes on base and check out tsp.gov/webinars.

 

[clove2019]

@kitty346 Have a good retirement, invest money, 2 properties (currently have one).

 

[kitty346]

@clove2019 What does “have a good retirement” mean to you?

Why “invest money”? That’s not a goal. That’s a way to reach a goal.

Why 2 properties?

(You don’t have to tell me the answers to these questions, but you should be able to answer them for yourself.)

 

[resjudicata]

@clove2019 People on this sub will make it seem like L funds are for idiots. If they’re a part of an overall financial picture they’re perfectly reasonable

 

[striveforagape]

@clove2019 Early advice for folks just starting out is so easy in theory and very hard in practice. A good retirement will be a slam dunk if you are consistent for at least 20 years at 20% contribution rate. But you can mess it up by not contributing or getting in trouble some way. Build the muscles now and it becomes easier later.

Lastly, the 2060 Fund is just fine. You can get more complicated with C and S and stress over the allocation between both, but I would recommend keep on the 2060 Fund until you get about 100-200k in there and by then you will have a decent idea of what to do. It makes it so easy to keep going.

 

[cbrooks624]

@clove2019 I’d highly recommend moving your allotments to the C or S fund. The lifescycle funds are still pretty conservative

 

[kitty346]

@cbrooks624 The newer L funds are much, much less conservative than the old ones. 2060 and 2065 currently have 1% in bonds (F and G combined).

 

[heartx144]

@cbrooks624 This right here. Or some combination of C and S. Also don’t sleep on a private Roth IRA as well.

 

[wildcolonialbibleguy]

@clove2019 Scroll down and find A-Dank-Dollars. See the math? Do it that and no more because you will lose matching funds. The only thing I did not like is his buy and hold method. I lived and invested through 2000-2010. You basically wasted 10 years if you did the buy and hold. I have an entire blog post just for those wasted years. At least use a 10 period moving average on a monthly chart and get in or based on price being above or below the line. Chart

 

[alpacachex]

@clove2019 $4,408/month base pay? 23000(tsp limit for next year)/12=1916.66667.

1917/4408=0.434891107

I'd just put 44% or 45% to be safe. All in ROTH so you don't pay taxes on money made, you'd get the extra refunded to you next year if you go over the limit(from what I've read online).

C fund has the best historic rate of return, I'm currently at 100% C, if the market crashes, good for me, I'll be buying up those shares at pennies every time my paycheck comes in and the market will go back up from a crash(unless the government collapses in which case I have bigger things to worry about).

Don't forget to open a personal ira(I use fidelity)(Disclaimer: If you make a fidelity roth ira, make sure you put the name the same way it is on your main bank, I had no middle name on the main bank and put my middle name in the ira setup and am going through hell to link my bank D. Personal ROTH iras have a limit of $6500/year($7k next year) and their version of the C fund is the s&p 500 index(SPY). Contributions do not come out of your paycheck, you transfer the money in through your bank.

 

[bj63]

@clove2019 Max out next year but space it out to get the 5% match every month. There's a stickied thread at the top

 

[tbslee]

@clove2019 See prime directive on r/personalfinance

401k = TSP

 

[nothinges]

@clove2019

What is your advice for me on the TSP?

Well, barring reading up on the individual funds / basics of investing, I'd recommend you move your L fund to 2065 or 2070 (I'm assuming you're roughly 23 years old) and increase your contributions to the most you can afford.

Having said that, were I in your shoes I would move my asset allocation to either 80% C / 20% S or just 100% C. C is large cap index fund (mirrors S&P 500), S is small / mid cap.

The other thing to understand is that the F / G funds annual returns refers to the growth of the share price. The thing is, these are fixed income funds and their primary utility comes from the fact that they pay interest in the form of dividends (the interest is roughly near the federal reserve rate, with the G-fund being slightly lower). Infuriatingly, the 30-day SEC yield (which is an approximation for the annual interest rate) isn't shown on the F / G fund TSP pages. You can approximate the F-fund's 30-day SEC yield by looking up a total bond index fund at any other investment site.

A lot of people swear by diversifying into international funds, but I think that this is faux diversification. There's also enough data available that the cumulative 30 year return on international index funds are one sixth that of US domestic stocks. Many people also miss the point here - the reason to diversify into international is not to maximize returns, but rather to hedge risk against US bear markets. In that regard, I think that the F fund does that better now that interest rates are > 0%.

But you're in your young 20s, so again...I'd just go with the aggressive option and put it into a total US index fund.

 

[serina1995]

@clove2019 I’d check out life skills for soldiers (501c3 nonprofit) discord server. They have a channel dedicated to TSP questions and volunteer financial professionals to answer them. Link in case you’re interested: https://discord.gg/hNdzzDg62T