Your Opinion - L2010 or L2020

[kannon8833]

I have set my retirement year to 2014. Due to good savings habits, our TSP and IRAs are looking ok. When combining our TSP/IRAs with estimated government pension and Social Security/SS Supplement, we are looking ok for retirement according to my spreadsheet analysis and continued "living below our means" attitude. To get there though we need about 5 to 6 more yrs of savings and growth in our TSP.

Currently we are in the L2020 fund, 100%. Now pondering if we should move all funds to the L2010 to reduce risk (and growth). According to my spreadsheet analysis, we are ok for retirement at 5 to 6% growth. Seems not much difference in L2010 and L2020 in terms of growth but risk levels seems to favor L2010 in the short run. Am concerned that we don't go too safe at this time and miss the final push as we head towards our retirement in 2014.

Would appreciate opinions - I find a wealth of knowledge and experience on this message board and value your opinions.

Thanks!!

 

[rokid]

Kannon8833,

Typically you want to incur the least amount of risk that will allow you to achieve your goals.

Does the 5-6% return requirement factor in inflation? In other words, if you need a 5-6% real return to achieve your goals, you'll have to achieve a 8-9% nominal return.

Based on a backward projection of the L fund returns in 2005:

...............2005......2006...... 2007....Average ...Standard Deviation (risk)

2010.........6.41.....11.09....... 6.40......9.20................ 2.70

2020.........7.02.....13.72....... 6.87......7.97.................3.91

I'll do a risk/return projection with more data when I get home.-----Jim

 

[TRAFFIC_DOG]

Kannon8833,

Based on a backward projection of the L fund returns in 2005:

...............2005......2006...... 2007....Average ...Standard Deviation (risk)

2010.........6.41.....11.09....... 6.40......9.20................ 2.70

2020.........7.02.....13.72....... 6.87......7.97.................3.91

I'll do a risk/return projection with more data when I get home.-----Jim

I think you may have inverted your numbers

 

[rokid]

Traffic_Dog

You're correct. Sorry about that! :embarrest:----Jim

 

[rokid]

Kannon8833,

I ran the return data for the period 1992-2007. Assuming the constant allocation shown for the L2010 and L2020 funds on the TSP site.

............Average Annual Return..........Standard Deviation (risk)

2010...............7.95%................................6.47%

2020...............9.08%................................9.76%

Of course, in reality, the L funds get more conservative over time. Therefore, the long-term returns will probably be somewhat less.

----Jim