Marine in need of advice on TSP investment... PLEASE HELP!

[puckzilla]

Hello everyone. I am new to this site. It seems like a good resource. I am very ignorant when it comes to investing...just a dumb country boy from Kentucky. Here is my scenario: I am Active duty military for almost 16 years now. Retirement is in about 4 to 5 years. I do not own a home but I am saving up to buy a home at that time while simultaneously trying to build some wealth in the TSP to supplement my pension. I am single with no dependents, so I am currently investing 22% of my base pay, which is about $875 a month in the TSP. I started out slow investing in the TSP in 2004, but in recent years, I have really tried to "up the ante". Hence, the 22%. I do not invest anywhere else...only the TSP. For years, my allocations were set up with about 60 - 70 percent going to the G fund, with the rest equally distrubuted to F, C, I, and S.

But here is my new methodology of thinking, I would like your opinion: Two months ago I changed my allocations as follows:
G-10%
F-30%
C-20%
S-20%
I-20%.

I currently have $45,300 in my account.


The reason I did this is because although I do not like to gamble, I felt that since I was not going to be able to draw the money until I am 59 years old, I might as well be a little more aggressive with the investments. I plan to switch it back to a more conservative spread in a few months..or should I switch back now? I lost about $600 after the election, but it is starting to come back. I noticed that most people recommend keeping at least 40% in G or F, which is what I have done my entire career, but I am trying to be more aggressive now since I have many years until I can draw the money. By the way, this is all in the Traditional TSP. I though maybe I should lower it back to 15% and invest the other 7% in the Roth TSP, but I am not sure yet. I may use that money to add to my house fund instead. I hope someone has the time and heart of a teacher who would not mind giving me their honest opinion beacuse I don't really know what I am doing. I just know that if I can make it to retirement, I should have a pension check that will greatly reduce my need to have a big investment...at least I hope so!

 

[nnuut]

Welcome to the Message Board puckzilla. This is a great opportunity for you because of your age, the more time you have to retirement the better. We don't give recommendations for investing your TSP allocations, instead we discuss our strategies with each other and track our results on the TSP Auto Tracker which gives you detailed information on a daily basis of how your strategies are working and you can see other member's results and get a good idea of who's technique is working best. There is around 1000 on the tracker, a great tool. The best thing to do is join in on the conversations and ask questions, we have some very knowledgeable members that are more than willing to help.
Best of luck
Norman

 

[puckzilla]

Thank you, Norman. I do have a question for you....When I change my allocation, does that change my entire investment, or just the subsequent contributions?

In other words, When I change my G Fund from 60 to 10 percent, did I just sell off 50% of my secure funds for riskier funds, or does that just mean my monthly contributions will only be 10% of The G Fund? Thanks!

 

[Frixxxx]

Welcome Puckzilla,

First of all, I'd recommend that since you are young, the "safe mode" would be to get into the market low, and out on the highs before the dips.

That being said, it focuses on your risk. If you receive your annuity at retirement, it is your "safe" house. It will be constant and monthly. The next question will be WHERE you are focusing on retiring and identifying the economic concerns of the area. Can you currently afford a house there? Third, set goals that insure you protect your money in the key areas of your life. Those key areas are where the tax man has the least influence of your finances.

You have to make decisions now about your future. I recommend reading "Investing for Dummies" as a start. And then I recommend Dave Ramsey's Financial Peace University. This covers the main aspects of identifying where you are and what you can do to assert, plan, execute the basics needed to secure your finances. Plus, it gives you membership into his webiste to use tools to enhance the knowledge and execute certain strategies. It's about $150.00 for both of these, but think of it as an investment in your knowledge so you can be smarter with $45,000 to make it $450,000. I was where you were about 13 years ago. I haven't looked back.

But tsptalk will allow you to interact with your ideas and strategies in a way that solidifies your thinking and achieving your goals.

Hope this helps and if you need help, try the EAP the Marines have to get support. They have alot of investment advisors and will help you make sound decisions.

Good Luck!

 

[Frixxxx]

Thank you, Norman. I do have a question for you....When I change my allocation, does that change my entire investment, or just the subsequent contributions?

In other words, When I change my G Fund from 60 to 10 percent, did I just sell off 50% of my secure funds for riskier funds, or does that just mean my monthly contributions will only be 10% of The G Fund? Thanks!

When you adjust your "contribution allocation" you adjust monies from the outside coming in. When you make an "InterFund Transfer", that redistributes the amounts in the funds. So you in essence you sell off from the fund lowering the percentage and buy in to the fund you are increasing the percentage.

Make sense?

 

[twodaystocks]

Thank you, Norman. I do have a question for you....When I change my allocation, does that change my entire investment, or just the subsequent contributions?

In other words, When I change my G Fund from 60 to 10 percent, did I just sell off 50% of my secure funds for riskier funds, or does that just mean my monthly contributions will only be 10% of The G Fund? Thanks!

When you change your "allocation" you only change where you are sending your subsequent contributions. To transfer your entire investment, you do an "interfund transfer," that is when you transfer your pool of money.

 

[Birchtree]

puckzilla,

It appears that we are in the early phases of a housing recovery which will provide economic growth into future years. So the future does look to have a bright potential. With that in mind, any funds you choose will make you money especially with a disciplined dollar cost averaging approach. The C fund currently provides the best value because of its' underperformance the last few years - this is where you can accumulate more shares. And remember its the number of shares that will provide the wealth in later years - you don't have to take money out of TSP until you are seventy years old - that provides ample time to really let the account grow. If you want a Roth IRA, I'd open an outside online account and buy individual stocks that'll make your life more exciting as you age and provide plenty of flexibility. Investing can be very nerve wracking but also fun. So I say a foundation in TSP of 50C,25S,25I should work well and give you hedged aggressive exposure.

 

[puckzilla]

Thank you! I do listen to Dave Ramsey and I have read the Total Money Makeover but have not taken FPU. I am debt free and I am trying to keep my life as stream-lined as possible. I am going to retire in Kentucky and have given alot of thought to life after retirement. Being as I will only be around 45 years of age when I retire, I will still work, but I have decided to avoid trying to keep up with the Joneses. I don't "NEED" a new $40K car, etc. I am single so I want to buy a small house with some land for no more than about $120,000. I think I can just about save that amount BEFORE retiring, so at that point I will be free to do with my money as I please with the exception of paying taxes. Taxes is another reason I am not spending money on expensive home or cars...the more they cost, the more they cost a person in taxes. Since "Uncle Sam" does not know how to properly use our tax dollars, I decided I am going to give him as few of my tax dollars as possible by being a very frugal consumer. I do admit that I need to learn a great deal as to how to keep my savings from being over-taxed. Plus, like you said, I would love to turn $45,000 into $450,000 but I do not know how yet...I am eager to learn!

 

[puckzilla]

Thank all of you for your replies and clarifying the transfer question. I think I am going to look for FPU in the area see if I can learn more from it. I am enjoying watching my money grow, but I would like to see it grow much faster. 10-12% just doesn't seem possible to me...

 

[nnuut]

Some links yu need to check out:
TSP Talk AutoTracker
FAQ:
TSP Talk - Frequently Asked Questions
Site Map:
TSP Talk Site Map
Message Board Rules:
vBulletin FAQ

 

[CrabClaw]

I am enjoying watching my money grow, but I would like to see it grow much faster. 10-12% just doesn't seem possible to me...

also look into the premium services offered on this site

 

[puckzilla]

Thank you. I guess I look like a big dummy, huh? Haha. I was serious when I said I am just learning about investing. For years and years I just put money in the G Fund and forgot about it....now I am trying to learn. IFT...now I know what that acronym was that I kept seeing this morning....thanks again!

 

[dannyboy]

Thank all of you for your replies and clarifying the transfer question. I think I am going to look for FPU in the area see if I can learn more from it. I am enjoying watching my money grow, but I would like to see it grow much faster. 10-12% just doesn't seem possible to me...

My approach is to ESPECIALLY, put the extreme maximum that I can while younger, meaner,, leaner and able to withstand a lot of other possible $$$ problems? Get a couple dozen k's under your belt, sign up with a TSPTALK recommended service and watch the $$$ roll in. I lost ~ $10,k since the election and counting, :embarrest: . It takes time and patience, the more you put in the more $$$ you may have in the future. TSPTALK recommended services, usually have a whole arsenal of facts and figures to back up their plans. Usually they work out well but if you get a good hunch?, roll the dice and follow it?
DB

 

[puckzilla]

Hi again. I was wondering if any of you had advice or opinions on the fact that I am currently putting 22% of my base pay into the TSP? Isn't 15% the norm to invest for retirement? I started putting 22% about 4 years ago to help make up for all the years I did not invest.

I am also very curious to hear some of your opinions regarding military pensions versus the civilian sector. For instance, my best friend invests in his 401K and upon retirement, that will be his primary source of income. THEREFORE...if he doesn't invest, he will not receive a retirement. In my case, as long as I retire honorably, I should receive a nice pension check of about $2000.00 a month for the rest of my life. Is it not true that a civilian such as my friend would have to personally invest several hundred thousand dollars to get that kind of return over the span of 30 to 40 years, which hopefully how long I will live after I retire?

That being said, Sometime I wonder if I should reduce the 22% to 15% and invest the other 7% somewhere besides the TSP such as an IRA? I really don't see a need for that between the pension check and TSP, so for now I am thinking I will use that money to help pay cash for a house when I retire so I do not have a mortgage payment.

THOUGHTS? Thanks! By the way, I am having issue with a pop-blocker so I saw a private message from another Marine but was unable to view it. I will try again later.

 

[Frixxxx]

Hi again. I was wondering if any of you had advice or opinions on the fact that I am currently putting 22% of my base pay into the TSP? Isn't 15% the norm to invest for retirement? I started putting 22% about 4 years ago to help make up for all the years I did not invest.

Remember TSP is a 401g not a 401k most of the same rules apply-2012 limits $17,000, the 15% is for 401K and that was for limits on matching funds (it's now 25%)

I am also very curious to hear some of your opinions regarding military pensions versus the civilian sector. For instance, my best friend invests in his 401K and upon retirement, that will be his primary source of income. THEREFORE...if he doesn't invest, he will not receive a retirement. In my case, as long as I retire honorably, I should receive a nice pension check of about $2000.00 a month for the rest of my life. Is it not true that a civilian such as my friend would have to personally invest several hundred thousand dollars to get that kind of return over the span of 30 to 40 years, which hopefully how long I will live after I retire?

There are many contributing factors to investing for a civilian to obtain the same level of return for a military person. But, to post the same information I've posted before. If a civilian wanted to retire at 40 and live until 90, they would have to purchase an annuity @ 40 for ~$1,000,000 to get about $2000/month.

That being said, Sometime I wonder if I should reduce the 22% to 15% and invest the other 7% somewhere besides the TSP such as an IRA? I really don't see a need for that between the pension check and TSP, so for now I am thinking I will use that money to help pay cash for a house when I retire so I do not have a mortgage payment.

THOUGHTS? Thanks! By the way, I am having issue with a pop-blocker so I saw a private message from another Marine but was unable to view it. I will try again later.

Goals. Depending on how you shelter/invet monies now, rate of return, and avenues of investment will all contribute to outcome. If you are investing 22%, then keep doing it, but spread it around if you feel the need.

 

[goforit]

i agree with frixx i am a mil person of 32 years but hold a civilian technician job with the mil(ws-8) i get matching up to 5% in y civ job but mil just started tsp about 5 or better ago maybe with no matching. you have been putting 22% in now WHY CHANGE IT you have lived with it for awhile and ADAPTED OVERCOME if you drop to 15% definetly find something you can have taken out directly from you check and put it in a stock or cd or... your call. remember long term is USUALLY THE BEST short term if you havethe nads will get quick money but also will lose quick money. bottom line diversify if you can. i rely on my job. when i retire and once i hit 63 i will be collecting five retirements. my fed technician, my civ TSP, my mil(E-8 for now) my SS( yes i will get it) and my mil TSP. mind you all of these will start at different times of my life because of making sure i dont get screw on taxes and early withdrawal's but by time i get to 56 i can TAKE home as much then as now just using fed civ and fed technician. so best advice you ahve stared right BUT read read read and listen. set a goal!!!

 

[puckzilla]

Gentlemen, thank you for your input. Ok...I will keep putting 22% into the account. As far as diversify, I was considering using the other 7% if I reduced it to 15% to put somewhere other than the TSP...but like I mentioned, it just doesn't seem necessary to me at this point in the game....I will hold fast with my TSP at 22% and nothing else. I should have roughly $100,000 in it when I retire. At that point, I think I can roll it over into an IRA and keep investing, or just let it sit until I reach old age. It seems to me that one's lifestyle at time of retirement is the biggest factor to take into consideration. Since I am single, with no great aspirations to acquire "things", I should be just fine. I just want enough money to live comfortably and fly to Thailand a couple of time a year on vacation. I don't want a new car or super-expensive home.....And I will keep reading....Thanks again!

 

[Birchtree]

Remember, love happens when you least expect it to - buy a queen size bed just in case.

 

[Frixxxx]

Gentlemen, thank you for your input. Ok...I will keep putting 22% into the account. As far as diversify, I was considering using the other 7% if I reduced it to 15% to put somewhere other than the TSP...but like I mentioned, it just doesn't seem necessary to me at this point in the game....I will hold fast with my TSP at 22% and nothing else. I should have roughly $100,000 in it when I retire. At that point, I think I can roll it over into an IRA and keep investing, or just let it sit until I reach old age. It seems to me that one's lifestyle at time of retirement is the biggest factor to take into consideration. Since I am single, with no great aspirations to acquire "things", I should be just fine. I just want enough money to live comfortably and fly to Thailand a couple of time a year on vacation. I don't want a new car or super-expensive home.....And I will keep reading....Thanks again!

Don't take this the wrong way, but savings should be toward your goal, not just a set amount.....22% is nice, but it must meet your goal. If you have something left over after meeting your budget, you can still invest. I recommend municipal funds to keep your liquid assets earning tax free interest. Try not to use it as a checking account, but it is an alternative for you.

 

[Boghie]

PuckZilla,

The best benefit of your pension is that you will start receiving it upon retiring from the military. As Frixxxxx stated, retiring early (like 40 years old) is next to impossible via a 401(k) style package. However, the financial benefit of a well funded 401(k) retirement will dwarf the $2,000 pension. Your pension will be play money.

However, to get there you have to take a reasonable amount of risk. And, I cannot determine your sleepy time risk aversion. I would probably talk to a real financial adviser, but maybe I'll play one on this thread.

• You are somewhere around 36 years old - thus, you have at least 24 years till you can pull money from your TSP 401(k)
• You are investing 875/month, thus about $10,500/year
• You have about $45,500 in TSP assets
• You lost 1.3% of your assets in the 5.5% 'correction' we just went through after the election.
• This tells me you only have about 20% of your assets in the equities funds (C/S/I) - something probable based on the contribution/allocation question.

Unless you are market timing - which takes tons of experience and skill - or you are extremely risk adverse - which may be true - this allocation is extremely conservative. My guess is that your average annual return is 3%. At that rate you are basically keeping up with inflation. Your account will be worth about $700,000 at age 65 and provide you with about $13K till age 85 (we will use that age simply because Quicken defaults to it as age of death). This allocation is almost a savings account.

I would strongly recommend almost the opposite allocation. Have 20% - 40% in G/F and the rest in C/S/I. You can slide to the smaller allocation in G/F because of both your age and the fact that you will have a solid pension. A 20% G,F / 80% C,S,I mix will result in an annual return of about 8%. Your account will be worth about $1.5 Million at age 65 and provide you with about $48K till age 85. All numbers are inflation adjusted.

In my opinion I would use an IFT to get into the L2040 or move to an allocation with about 20% in the G/F. Had you done so in October 2007 - at the top of the market and thus the worst time to be in equities - and kept investing 22% your account would be higher than it is right now. Probably significantly. I know that sounds weird, but think of all the cheap shares of C/S/I you would have bought and added to your share balance and you can see why. As long as you don't get scared and sell at the bottom.

Maybe start using an IFT each month to move 10% more into C/S/I till you meet your sleeping point.

By the way, at your age Dave Ramsey would have you 100% in the 'C Fund' and just leave it at that.