E-5, 9 years, 30% going to TSP should I change anything about my contributions

[mrogers]

Hey everyone since the new year had started I wanted to know if I should change anything around for my tsp. The link below is a picture of my TSP.

https://imgur.com/a/mS5YQaN

 

[hamerek]

@mrogers 30% is impressive. When are you looking to retire? You've selected a target date fund that indicates you're aiming to retire around 2030. Is that accurate?

 

[mrogers]

@hamerek 2032-35 is what I am looking at for retiring. I've read that for the L fund should be around the time I was looking to retire but I also read invest in the cheaper L funds in the hope they go up, not sure what is better.

 

[monroedm]

@mrogers Your L fund should be set to when you plan to start taking withdrawals from it. Not your retirement from service. My opinion.

 

[mrogers]

@monroedm Oh dang, okay so I should shoot for the 2045 fund.

 

[monroedm]

@mrogers I would set it to whenever you are close to 60/65 years old. I would also move all your funds over as mentioned by another person. The CSI funds are fine if you want to manage it a little. If not just move everything to L and let it do it’s thing

 

[mrogers]

@monroedm Wow, thanks a lot guys it is good to know I haven't really messed things up.

 

[winter_rose]

@mrogers It's better than having everything in the g fund but yeah you're missing out on a ton of gains because half your portfolio is in the g fund.

 

[resjudicata]

@mrogers This was what I was told as well.

 

[sharong]

@monroedm Yup. When you reach the age of retirement (59.5?) not the year you retire from the AF.

 

[hamerek]

@monroedm Definitely. From TSP.gov:

When an L Fund reaches its target date, it goes out of existence and any money in it becomes part of the L Income Fund.

You definitely don't want it to switch to L Income (which will lose money vs. inflation) before you want to withdraw from it.

 

[holywalk]

@mrogers The "cheaper" notion isn't accurate. It doesn't matter what the price of it is right now. $1 is $1 invested. Don't look at the price of the fund.

 

[hamerek]

@mrogers As the other commenter indicates, you should choose a Lifecycle Fund based upon when you will begin withdrawing from it, not based upon your military retirement date. If that's still 2032-35, so be it. But I would shift all your money towards it. It balances automatically based on your retirement date, so allocating money in other funds kind of undermines that.

 

[mrogers]

@hamerek I know everyone is recommending I move all my funds to the correct L fund now, but would it be fine if I just move my current L funds to the new one, leave all the other funds alone, and make my new L fund allocation to 100%?

 

[hamerek]

@mrogers I mean, it's your money and you won't go broke by leaving the rest of your money in the funds you've already invested in—I just don't know why you'd do that.

If you were invested in a combination of the appropriate Lifecycle Fund and the C, S, or I Funds, then I would kind of understand that. The C, S, and I Funds are slightly higher risk but offer marginally higher returns (since they are fully exposed to the stock market and have no insulation via the bond market).

Conversely, if you were invested in a combination of the appropriate Lifecycle Fund and the F or G Funds, then I would kind of understand that. The F and G Funds are significantly lower risk but offer considerably lower returns (since they are entirely tied to the comparatively conservative bond market).

You're invested in all of it, though. You aren't weighting your portfolio to be purposefully higher or lower risk—you've just got a little money everywhere. I'd move all of it to the appropriate Lifecycle Fund.

 

[mrogers]

@hamerek hmmm, okay what everyone is saying makes sense. I just wanted to understand the reason behind it all. Thanks for the help!

 

[tn8710]

@mrogers unless you will be in your 60's at 2030 you should move it.

 

[godexists]

@mrogers Get out of the F fund. Straight garbage.