I'm 55 so I have the option of working longer. I'm on fers and have about 490 in tsp. Own about 250k of house no mortgage. About due for a new car and have money aside for that.
Your not in bad shape. As PessOptimist pointed out, you can project both your pension and social security. Your 490K in TSP can safely generate $15K to $20K per year inflation adjusted. And, you have five years of investing left. If you find an allocation that is a bit safer than the one you have which makes 5% over inflation (total of 7% in today's environment) than you will have about $720K. That $720K will result in a safe, inflation adjusted income stream of a little more than $30K/year till age 90. If you retire at 65 your nest egg will be approximately a million. That will let you pull in a little more than $40K/year. If you want to be safer you can pull a little less and your nest egg should last forever.
A very special book for initiating an investment allocation is Ric Edelman's
"The Lies About Money". There are 40 allocations in it and a short quiz to kinda help you find one.
His site is exceptional and his radio show is very, very good. At the moment I am typing this I am listening to his show. His free 'Guide to Portfolio Selection' is a valuable resource. That is what you need.
And, you need to spend a little money and find a good adviser. Retirement investing is not gambling and da'Boyz and the greedy kleptocratic CEOs want to make money too. When they make money you do as well. Using Edelman's site and books I found the following three allocations for my baselines:
- Aggressive: 2% G, 15% F, 48% C, 19% S, 16% I Expected Return: 6%, Expected Variance: 9%
- Normal: 12% G, 22% F, 39% C, 15% S, 12% I Expected Return: 5%, Expected Variance: 8%
- Conservative: 12% G, 27% F, 37% C, 13% S, 11% I Expected Return: 5%, Expected Variance: 7%
In your situation you should never touch the Aggressive allocation. The way you read this is as follows: The Conservative Allocation (which should be your 'Normal Allocation') will generate an annual return of (5% + Inflation (say 2%)) +- 7% Variance (Risk) approximately 2/3rds of the time. That means that my Conservative allocation will generate between 0% and 14% in any one year about 66% of the time. If you extend the tails to 95% of the time the range extends to -7% and +21%. To contrast, the C Fund generally returns between -8% and +26% of the time. The S Fund is even more variant. And, between you and I, I would not count on the higher numbers
. The Expected Return + Inflation has the highest chance of being met by far. And, something like 2008 messes with everything because all asset classes other than Cash (G) failed at the same time. Bonds (F) recovered quickly and Equities (C/S/I) powered out of the depths with muscle car gusto when they took off. But, what would happen if you were ready to retire before the ciallis took hold.
Your odd allocation should return between -1% and 11% 2/3rds of the time. My guess is it will fail far more than the numbers suggest because you cash (G) holdings cannot compensate for a correlated decline in C/S Funds. That is, those funds will likely drop or raise at the same time and you have nothing that is likely not correlated to that action. Lastly, you might want to find a scientific allocation and shift a little of the Bond (F) assets to cash if concerned or Equities (C/S/I) if in a bull mode. Bonds are kinda toppy.
.
