Life after TSP 3

[Spaf]

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In about 2 years I'll effect my retirement under FERS. In researching on what to do with my TSP account, I have tentatively settled on two possible actions. Both require a transfer of TSP accounts to traditional IRA's. Vanguard and USAA, appear to be the leaders at the present time. Both have mutual funds with low expense ratios, and both offer plans with and without asset management.

Vanguard seems to be somewhat complicated (with a lot of paperwork), where USAA is somewhat more simplified. I have my auto and home insurance with USAA, and their service has been very good, I just don't know with their investments?

Does anyone have any information on Vanguard or USAA that would sway my choise one way or another? :*

 

[azanon]

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You're right, both have some great options. Again, if you want a completely fire and forget, one fund for all, i'd probably just pick USAA's Balanced Fund. I see Vanguard has a "balanced index" with a low expense ratio, but despite that it seems to underperform USAA's selection.

Those asset allocation funds are just another form of "balanced" funds, so those would also be nice too.

Shoot for roughly 110- your age in stock. Remember, you're hoping you'll live another 30 years or more, so to keep up with inflation, you should maintain a minimum of 30% stock, but i recommend something closer to the formula.

If you'd prefer not to have to shuffle around money to keep the percentages the same, then just pick one fund like a balanced fund that approximates that percentage. USAA tends to hover close to 60-70% stock in their balanced fund, but they mitigate that by holding a great deal of stable blue chips.

Boring portfolios are some of the best around.

 

[Spaf]

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Thanks azanon!

I need a boring portfolio for my IRA. I don't want to be greedy. I just want it to work! My other investments I can play with, I just don't want to have to play with my the TSP transfer to a IRA.

USAA gave me a mix for a Mod/Conservative and a Moderate allocation of funds. My rough estimate indicated a 1 yr return of M/C=9.85%, the M=8.55%. Nothing in the M/C showed a loss of over 3% for the last 5 yrs. The M had one loss for 2 yrs over 3%, this was in their large cap growth fund.

Vanguard gave me a mix for a Life Strategy portfolio and a Individual portfolio. My rough estimate indicated a 1 yr return of LS=10.82%, the Individual =10.38%. Both mixes had high returns on international funds, and the Individual fund had a high return on the Windsor II fund. Long term 5 or more years, these funds were not returning that much.

I guess this represents your comments on performance!

Thanks again, and have a great day!

 

[azanon]

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Those sound about right, and would roughly represent the performance you could expect from one balanced fund too if you went that route.

 

[jeeperspeepers]

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Thanks AZ and Spaf. I'm in a similar time frame for retirement. However, I know nothing about IRAs. Would I do better transferring my TSP to USAA or taking an annuity from TSP? Any advice you can offer will be appreciated. :?

 

[Spaf]

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jeeperspeepers wrote:

Thanks AZ and Spaf. I'm in a similar time frame for retirement. However, I know nothing about IRAs. Would I do better transferring my TSP to USAA or taking an annuity from TSP? Any advice you can offer will be appreciated. :?

You transfer your TSP into a IRA of mutual funds, You take $ out, and you still have your investment. Annuity is a insurance product, You buy it with your TSP funds. (several models to choose from). Annuities are pricy (my opinion) but very little risk. IRA's always some risk (because you are in the market). At TSP you can figure out your annuity return and options in their calculator. With an IRA you can safely withdraw 4%-5% annually, plus add 3% inflation. So the IRA needs to increase at least 7% on average. However, there are good years, bad years, and average years. Decisions, decisions!

 

[Patricia]

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My retirement - TSP, Roth IRA, investment????? I just retired with 19+ years with the government - I had an opportunity to work for a private company making alot more money, with better benefits, retirement etc....therefore I took an MRA, which cost me 25% in retirement. I had my accountant look at the options before I retired and this looked like the best thing to do. Now here is my question - I have an Roth IRA which is in an investment (Dodge and Cox Balanced and also in some oil stock)....I also have USAA Balanced Strategy - should I roll my TSP into one of those, leave it until I retire from my current position, then cash it out - take an annunity or...? I want to have my home paid off when I retire ( in 5 years) and was planning on taking the money to finish paying it off... HELP!!!

 

[Spaf]

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Patricia

Everone need to analyze their retirement based on their own situation. What I have been told is that a Roth IRA is tax paid. Your USAA funds could be tax paid or deferred. Your TSP is tax deferred. It's best to transfer deferred accounts to a traditional IRA, generally. If you take the money, you are gonna owe US about 20%.

Paying off your home can be good or bad. Can you itemize your IRS or will you have to take a standard deduction. Here you (and your accountant) need to crunch the numbers. Married? Spouse working? Other income?

Paying off other bills is my plan i.e., credit cards, cars, etc. Have refinanced my home to a lower rate and paid it down to have the lowest payment but still be able to itemize. Would like to have 20K in emergency, and 100K just to play in the market, plus the FERS to use for my retirement. Most folks say that you can withdraw about 4% from a TSP/IRA transfer and have your principal+inflation in tact (they say this).

Good luck, and have a good day .

 

[TheProphet]

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I am planning to KEEP THE CASH...

andpaywhat I have to pay from the returns... 10% - 20%...

withdrawthe maximum the lowest bracket allow you... $58,600 a year today

at !5% fro couples...

Ialso will receive as FERS the1%government pention and the not much

social security... ;-)and hope it still includes medicare, medicaid... etc... ;-)

BOTTOMLINE... I am planning to capiltalize on the TSP and continue investing the

cash...

Leon

 

[TheProphet]

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HOLD THE CASH !!!

I wouldinvest itin similar Funds like the TSP plan

Dow... DIA

S&P... SPY

S Fund... IWM

Leon

 

[Patricia]

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:uthanx for the info. I guess I need to have a detailed discussion with my tax accountant.

Patricia

 

[Spaf]

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Yea!

Seeing your accountant for your situation is the best thing to do.

Ikatteng talks about cash. I was told that you need at least 20K in a liquid account for emergency (money Mkt, mutuals, etc). Once you get your retirement set up, give us some feed back. Like we can compare accountants?

 

[jeeperspeepers]

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Another idea to consider in or near retirement is using your equity in your home vs. paying it off. I've paid off my home, cars, credit cards, etc. -- everything with retirement in mind. Now I'm refinancing, actually a first mortgage, to build my retirement home and will keep the presenthome for rental investment. The income from the rental willmake the payment on the mortgage. There are interest only mortgages available which are a great deal for people like me, close to retirement, got enough equity in my real property (three rentals in all) to leave to my children, so why do I need to pay off another home. My kids will be very well off when I depart this world anyway. The obvious advantage to interest only mortgage is the low payment, as well as the extra perk of paying (if you wish) any amount you want toward the principle and the entire amount you pay extra goes toward the principle.

 

[Patricia]

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I have 20K in liquid funds through an equity line of credit. Suze Orman - who I've seen on TV recommends that, as well as paying off all credit cards or at least paying what is charged on a monthly basis, as well as being fully funded in your 401K, TSP, Roth IRA etc. I am...but since I got started with all this soooo late in my career and being single, I'm worried I'll be selling pencils on a street corner if I don't do a few other things - and as I have very little experience in the market, I'm picking everyone's brains. Thanx for all the help. Will let you know what my accountant says.



Patricia

 

[Beccazan]

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I hope this makes you feel better. I started late in my career also. I started TSP as soon as it was offered to active duty and maxed it out ever since. Single with no kids and no debt has allowed me to not only max out TSP, but open a roth (Jan 04) and put $13,000 into ING. My plan is to put another $18000 into ING in 2005 then in 2006 open a balanced fund with Vanguard (vasgx). After I retire from the military (2010) I will rollover TSP into a traditional IRA (vgsix) and use my military pension to continue funding roth and balanced funds. I will buy a home after retirement (not looking to be the next donald trump!)

Hoping this mix is diversified enough so I don't have to freak out about making enough to supplement pension. I am definitely a hands-off investor.

Any comments/suggestions regarding my plan would be appreciated!

Beck

 

[Rolo]

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Spaf wrote:

Vanguard seems to be somewhat complicated (with a lot of paperwork), where USAA is somewhat more simplified. I have my auto and home insurance with USAA, and their service has been very good, I just don't know with their investments?

Does anyone have any information on Vanguard or USAA that would sway my choise one way or another? :*

I think USAA funds are mediocre at best. Vanguard has much better quality funds and a broader selection. I wouldn't be surprised if their fees were better.

I, too, have all my insurance with USAA as well as my Roth and SEP IRAs with them. You aren't limited to USAA funds if you open a regular IRA account with them, so you have access to just about the entire fund universe. All of my funds are NTF (No Transaction Fee) and there are hundreds to choose. You may not have that flexibility with Vanguard.

My g/f's IRA is with Oppenheimer. They suck. In the future, I will move hers to Scottrade and may move mine to them as well. You have access to pretty much everything through them. The ONLY cost: If you redeem a fund held less than 90 days, you will incur a $17 charge. whoopee...

 

[Guest]

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Rolo wrote:

My g/f's IRA is with Oppenheimer. They suck. In the future, I will move hers to Scottrade and may move mine to them as well. You have access to pretty much everything through them. The ONLY cost: If you redeem a fund held less than 90 days, you will incur a $17 charge. whoopee...

Unless you transfer between the same "family" of funds. :^

 

[Guest]

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Rolo,

With Scottrade, If you invest with Potomac, Rydex or Profunds families, you can keep it in for one day even and sell and there is no fee (no 90 day minimmum! I'm not sure about the same family of funds like Mike was talking about. He's done more recent research than me, but I know the above fund families don't have the $17 fee!

Joel

 

[Rolo]

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Whoo! I dinna know that. That opens it up for some short-term buying.

 

[Ecurb]

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Rolo, :#

My wife just retired. We have considered rolling over her TSP to a traditional IRA... ...self directed.She can also take the lump sum (taxable) but we have pretty much ruled that idea out. I wondered if you and the other members could give us your thoughts.

I enjoy reading the message board and Toms morning thoughts on the market. The posts help me make many of my financial decisions,along withmy charting. Sometimes I agree with the posts and sometimes I don't, either way the site is informative and thought provoking thanks to members like yourself...and I notice you are considering Scottrade. Again, if you or anyone else have any suggestions, they will be much appreciated. :^

Ecurb