New TSP fan

[bkrownd]

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Nice to find people talking TSP! I've been in TSP for about 16 months, and not sure how much longer since my position is temporary. 1/5 of my savings and investment is in TSP now. Anyhow I was pretty shocked, as I started reading this forum, by how many people are moving their allocation around (or considering it) on a weekly basis! I had no idea. I've just been parking my money in the funds they fall in straight out of my paycheck. Are active reallocators here doing long and short range analyses of how much they're gaining/losing by moving their TSP around so often? Personally I don't think I know enough to make good moves, so I only fiddle with my percentages across all my accounts about every 6 months. (Fortunately I was even more of a passive financial dunce until 2003 and kept all my 403b money in money market through the bubble bursting years.)

My only gripe with TSP is that the contributions only come out of my base salary, and do not include the other 1/3 of my salary from COLA/overtime/hazard pay/etc. With maximum 15% withholding and agency match I'm only getting about 1/2 the tax-deferred TSP allowed by law, and I end up investing a decent fraction of my savings in taxed savings and mutual funds just to get it out of the graveyard called "the bank". (home buying not an option for me, since I'm only living here short-term) :?

tia, bkr

 

[tsptalk]

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Welcome bkr! Thanks for joining us. We don't guarantee you'll make a bunch of money but you will definitely learn something here.

Tom

 

[bkrownd]

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So here's a thought. Right now I split paycheck contributions 50% C, 30% S, 20% G. As a time-strapped novice I can't see myself doing much/any active managment, but maybe something really simple like the following would work. Would I be likely (in your humble opinions) to improve my TSP gains by allocating 100% of my biweekly paycheck contributions to (the less volatile) G Fund, and using it to periodically buy more C/S/I after waiting for a certain percentage drop (say 1-2%?) in one of the equity funds that makes share prices ever-so-slightly cheaper? Has anyone done a quantitative study of something like this?

(Note I don't have 'I Fund' because 20%+ of my mutual fund total is already in DODFX.)

 

[bkrownd]

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OK, maybe that plan sounds like I'm trying to save nickels and dimes instead of dollars.o Reading the explanations at tspgo.com is clarifying some things for me.

 

[Birchtree]

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bkrownd,

At this early stage it would be simple and easier to allocate your contributions 50%C and 50% S if so desired. Leave the timing of dollar cost averaging up to fate - you will do just fine. I'm holding 100%C and 100% of my contributions go toward dollar cost averaging into that particular fund - I'm not concerned where they land, the pricing will vary and usually follow a trend line overtime. Good luck.

Dennis- oh next year you can do $15K plus $5K more for over fifty.

 

[bkrownd]

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Birchtree wrote:

Dennis- oh next year you can do $15K plus $5K more for over fifty.

Thanks for your input on allocation.

Wow, you're right it looks like they eliminated the 15% limit on FERS for next year! Is 100% pre-tax TSP contribution really going to be possible? This is most excellent - and complicated - I'll have to be careful and make a contribution budget that gets me up to the maximum $ limit and still takes advantage of the maximum agency match all 26 pay periods for that year. Wow, this is good to know.

thx, bkr

 

[bkrownd]

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Birchtree wrote:

Dennis- oh next year you can do $15K plus $5K more for over fifty.

Uh, does that $15k include the agency matching contribution?

thanks, bkr

 

[Birchtree]

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bkrownd,

The 5% match is not counted in your $15K total. Some agencies such as the military have no matches. If they are deployed in a tax free zone they may contribute any amount that is affordable. Consistant dollar cost averaging is the primary plan while one is accumulating - once you have a considerable amount you can join the pistol team and hit more targets. The potential is available to enhance your account.

Dennis

 

[bkrownd]

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Birchtree wrote:

The 5% match is not counted in your $15K total.

Oh, next year is gonna be gooood! Almost $21000 going into my TSP + IRA, and I've already got enough saved to cover 6 months rent though I doubt I'll need to dip into it at all. Hope I don't crash my bike and blow it! :s

 

[pyriel]

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Something to watch for if you want to also maximize that 5% matching contribution. This was actually provided by one of the knowledgeable poster on this board...

Mike Causey's Federal Report

Sep. 21, 2005

FrontLoading Your TSP

Yesterday's column about front-loading your TSP prompted a number of readers to warn of the downside (loss of matching contributions) of front-loading for workers under the FERS retirement system.

As Mary Johnson of Clifton, Va., writes:

Please let your readers know that making all of their TSP contributions in the first few weeks or months of the year will greatly reduce their TSP benefits. While this approach will allow an employee to have more money in the fund for a longer period, it will reduce the matching funds from their employer - losing up to 5% of matching contributions.

The key to ensuring matching funds for the entire year is to make sure you contribute in every pay period for the year. If the employee does not contribute in a given pay period, the government doesn¹t contribute either.

The key to maximizing contributions AND earnings is to contribute a higher amount during the first part of the year and then a reduced amount during the back end."

The vast majority of the people retiring next year, and over the next couple of years, will be under the CSRS system which has no government match. But for FERS employees front-loading does have its downside.




***Please note that if you are military that this does not pertain to you since we have no matching contribution...

 

[bkrownd]

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Yep, that's what I'm thinking about. Also my salary will change at annual review time, so I'll have to be careful to budget a cushion for that as well, and re-budget afterwards to come in just at the limit on the last paycheck. Tricksy.

 

[Rolo]

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bkrownd wrote:

...allocating 100% of my biweekly paycheck contributions to (the less volatile) G Fund, and using it to periodically buy more C/S/I after waiting for a certain percentage drop (say 1-2%?) in one of the equity funds that makes share prices ever-so-slightly cheaper?

Sounds like actively managing to me! That's a practise I employ when I plan on staying 100% in a particular fund (new contribs to G, then pop it into Ion a dip).

bkrownd wrote:

(Note I don't have 'I Fund' because 20%+ of my mutual fund total is already in DODFX.)

Is there a limit on how much you should put internationally? Yes, 100% would be that limit in my book. My portfolio is over half international and has benefitted greatly because of it...domestic markets just haven't been very good lately ("the best defense is no be there!")