Life after TSP

[Spaf]

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Your replies are needed (and appreciated).

I have been looking into retirement planning from FERS. We have a TSP account that can be converted into an annuity or rolled over into an IRA.

The annuity will give us money till member and spouse die. Kerchunk.:s

An IRA will give us mutual funds to grow/decline we can draw from, and leave the rest to whomever!

I have inquired about an IRA from Fidelity, USAA, and Vanguard. Both Fidelity and USAA offer financial planning for a charge. and both have funds that have low to high expense ratios. Vanguard sort of prides itself with funds with low expense ratios.

I am getting recommendations from all three companies of asset allocations of 60% stocks and 40% bonds. Is this good?

I am sort of leaning toward Vanguard, at the present time.

What are your thoughts? Has anyone a reality check of life after TSP? And, where are the best places to go after TSP????:?

 

[Guest]

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Don't have the answers to your questions, but was wondering if you have checked into Profunds? I'm going to be starting an IRA account for my girlfrind with Scottrade and will be using these funds because they have bull and bear funds and also 2X funds of each type. Not sure if others do.

New to IRA's so are you talking about a Roth or a traditional IRA? Or does it really matter after you retire?

M_M

 

[Spaf]

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Yeh....big matters.

TSP is tax deferred. So I got to go traditional IRA rollover (transfer).

The buy and hold purchase, and the market timing methods,have a critical parameter that is not always made clear.

The critical element in my opinion is to buy low and sell high.

If the market was static (stable) and went up 10% each year, things would be rosey. In alook at the market over the last decade. The entry periods can make all the difference in the world.

I may not want to transfer my TSP account when I retire. Where is the market? This is the question. Is it in a resession going down, on top of bubble ready to burst. Or is it comming out of a correction, low, ready to run with the bulls. I could transfer to very good funds, the market turn bearish and the accounts ruined.

All things in reality. The TSP retirement transfer of funds is critical, and has to be buying low into the market, on mutual funds with low expense ratios, andconservative to moderate allocations.

You could retire when the market is low, or you could haveanother savings fundmade up for retirement expenses to ensure a time frame can be secured for transfering the TSP at the proper time, buying low.

 

[Cinderella]

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You've heard the saying, "don't put all your eggs in one basket". I think that is true of the tsp because when you retire you might want to have an IRA to use until the time is right to withdraw your tsp. There are three basic withdrawal options available to tsp participants. 1) A single payment to you (20% fed. tax) or all or part of the account balance can be transferred to an IRA (no fed. tax until withdrawn from the IRA). The tsp account "cannot" be transferred directly into a Roth IRA. 2) A series of monthly payments paid out in substantially equal installments based upon: a specific number of months, a specific dollar amount, or life expectancy. Monthly payments to you are expected to last less than 10 years and are subject to 20% fed. tax. If the series of monthly payments are expected to last less than 10 yrs, the payments can be transferred to an IRA. 3) A life annuity purchased from an insurance company. The last time I checked the current tsp annuity provider was Met Life. When the annuity is purchased the tsp account is closed. All further communications regarding the tsp annuity will be with the annuity provider. Five types of tsp annuities are provided. 1) Single life annuity level payment. 2) Single life annuity increasing payment. 3) Joint and surviving spouse annuity level payment. 4) Joint and surviving spouse annuity increasing payment. 5) Joint and other survivor annuity level payment. You may estimate an annuity under different scenarios with the current interest factor by using the calculator function on the tsp website www.tsp.gov In addition to the three withdrawal options, you can choose to leave the tsp in the tsp and you can continue to move the money among the investment funds until you are 70 yrs old. At that time, a minimum distribution must be made. I realize this explanation has been loooonnng, but I hope I have answered some of your questions.

 

[Guest]

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Spaf,

What is the yield on the annunity? The bad thing about an annunity when you and your wife pass...that is it game over. If you tell me the yield we can compare with investment vehicles that through offa living income.

Fidelity now has lower fees on index funds and their bond funds are better so I lean towards Fidelity right now. I am hoping vanguard will lower their index fees also.

By I would look towards the IRA. Depending on your other income streams depends on your allocation. You need money to live. Having a bunch of stock funds will not help pay the bills. Remember if you put money into the S&P 500 Index six years ago you are under water down 16%. If youhada GNMA fund you would be up 40% and receiving a nice 4.54% yield to helpagument your income.

Retirement is very important. In my opinion the market will not recover until 2015 and we are bound to a trading range until then. Call me crazy....but see my in 2015 :^.

MT

 

[azanon]

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My recommendation is to roll the money over into an IRA, if you're disciplined with your money. Annuities are bad deals, because the rate you'll be paid monthly is based on a very conservative rate of return, not even counting the profit they make from giving you one. They're also bad because in a sense you lose all your principle the moment you get one and you will have none of your hard earned money to leave to your heirs.

As for stocks/bond ratio, i like 110 minus your age in stock. If you want to make it really simple, get a balanced fund from one of those companies and work with either an advisor or some other expert to work out a safe withdrawal rate. Some sites advocate the conservative 4% of gross per year (early retirement home page), others go as high as 6-7% of gross. The former is designed to maintain your principle in perpetuity. Back to balanced funds, i really like the concept because the fund manager, in essense, is contantly buying low and selling high; he has to because that's the only way he could maintain the agreed-upon stock/bond ratio. Say, for instance, in the 90s bull market, balanced fund managers would have had to sell some stock along the way to keep the ratio proper. Historically (looking over the past century), balanced funds only have a negative return about one year in 10.



Summary: Roll the annuity over into an IRA, figure out a safe withdrawal rate, get a "balanced" stock/bond ratio that will keep up with inflation but not put your money at undue risk, and have something to pass onto your heirs. Simple (1 balanced fund) is not necessarily bad, and there would be no reason to feel guilty that you're earning a very competitive long term rate of return with just one fund.

 

[Guest]

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A,

Good advice. Plan on taking the withdraws the first week of the year (sell high).

Also with your bond holdings...stay in money markets and very short term bonds until the 10 year treasury gets over 5% again.

MT