- quote -

OF COURSE the S&P 500 (C Fund) has outperformed a portfolio of
intermediate/long government bonds (G Fund) over the *past* decades. And
while that performance doesn't guarantee what the *future* holds, I
quibble not with the assumption that the future will look like the past.

But everybody is missing my point. The original poster can invest in the
S&P 500 in any number of ways going forward. And I assume he will do so.
But his TSP account and the G Fund presents him with an opportunity to
invest in a vehicle that he cannot find anywhere else. Granted, it's a
trivial amount of money. But why not put it in the G Fund and use that to
diversify his equity holdings in other accounts?

On Jan 26, 10:01 am, Joshua Bilsky <joshbil...[at]nospam.net> wrote:
- quote -

Thanks for your insight. I think I'm going to move it all into the C
- quote -

That's probably true. The I fund has 2 levels of risk: 1. stocks and
2. the US dollar against the foreign currencies in which it is
invested.

I think what you want to do now is forget it for at least 20 years....

For such a
- quote -

For any period of less than 20 years, you really can't bank on it. But
for over 20 years, you have a good chance of coming out best with C
fund. And best by a factor of 2-4 times the money (assuming you are
investing for 30 years).

On 2007-01-25 14:07:07 -0500, darkness39[at]yahoo.com said:
- quote -

Thanks for your insight. I think I'm going to move it all into the C
fund. The C fund seems like it experiences relatively stable growth
compared to the I fund which seems much more volatile. For such a
small amount of investment, there's probably not much for me to lose
for being more aggresive. I won't be relying on this as a primary
retirement funding source. If it was a lot more money, I'd probably do
what Paul said and throw it in the G fund.
--
Josh Bilsky
http://www.joshbilsky.com

On Jan 21, 8:16 pm, Joshua Bilsky <joshbil...[at]nospam.com> wrote:
- quote -

And for this reason, I wouldn't think too hard about the tax
implications or the position re your overall portfolio (all types of
accounts). If you had more money, that would be relevant. But in this
case, you really want to max out your expected return.

In a vague way, this is the equivalent of putting the entire bet on 29
Red at the casino. However, equity funds return better than casino
bets! You are very unlikely to lose all your money (after inflation),
and there is a good chance you could create a tidy little lump sum for
yourself when you are 65.

In fact, I would either put it in the I fund (international stocks) or
the C fund (common stocks). There is a case for the S fund (small
stocks) but that would be at least as risky as the I fund, and perhaps
more so.

(I'd have to go into a long aside here about my feelings about small
cap stocks. Which basically boil down to the high returns are so well
known, that I believe going forward they won't return as much relative
to large stocks as they have done, and therefore the investor is better
off not trying to grab that higher return (which in any case always
came with higher risk).


So, if I understand this correctly, the G fund
- quote -

If it is the government bond fund, that would be true. The lowest risk
is the government TIPS (inflation indexed bond) fund.

Since this money is going to sit in TSP for a
- quote -

Total market fund probably has the highest risk and highest potential
return. An international stock fund is the other alternative. See
above.

Also, I take it that
- quote -

I would go with that.

Right now I still have the money
- quote -

What TSP funds to pick depends on:

1) your desired asset allocation
2) your other retirement investment options
3) your taxable investment options

The general idea is what you want to put your higher
distribution/higher yield options in retirement accounts. After that,
you decide which retirement plan has better options for each of the
categories you are interested in.


Joshua Bilsky wrote:
- quote -

"darkness39[at]yahoo.com" <darkness39[at]yahoo.com> wrote:

- quote -

Well, I think I will take the general consensus here and leave this money in
TSP. As has been mentioned, this is such a small amount that it is really
nothing more than a bonus. So, if I understand this correctly, the G fund
is 0 risk but small return. Since this money is going to sit in TSP for a
long time, wouldn't it be a better idea to do what darkness said and put it
in the large cap or total market to get higher return? Also, I take it that
we're all in agreement that it is better to put this small amount of money
into one fund rather than diversify? Right now I still have the money
allocated to several of the funds.

-JB

--
Josh Bilsky
http://www.joshbilsky.com

joshbilsky[at]gmail.com wrote:
- quote -

My own thought is you should hold the TSP in an all equity index fund,
and leave it.

The reason being costs are very low, and you are maximising expected
return. It's basically a roll of the dice, and assuming you have
another 30 years to work, it could easily be 8 times the size it is
right now (doubling every 10 years ie a 7% average return pa) or even
12 times (doubling every 9 years ie an 8% pa return). $16k is a handy
chunk of change even in tomorrow's inflation eaten dollars.

You won't be planning to retire on this money, but it might turn out to
be a nice bonus. Say it turns into $16k, then that might buy an
annuity at 65 of $60pcm ($720 pa at a 4.5% annuity rate).

The biggest disadvantage I can see is that when you do come to retire
and buy an annuity, you will be disadvantaged because of the small size
you are trying to buy.

Paul Michael Brown wrote:
- quote -

I would take it the other way. Put it all in an equity index fund
(large cap or total market) and leave it until 70.

The reason being the average return is likely to exceed 4.5% pa, over a
30 year period, say. Over a very long run, the downside risk is more
about inflation, and about real income growth (which makes you feel
worse off, even if your investments have grown), than about losing
money in capital terms.

At 7% pa and 30 years: 8 times

at 8% and 30 years: c. 10 times

If one had a 12% return (about the return from an SP500 index fund with
low costs over the last 30 years, I believe) then that would be 30
times. I don't however expect equity returns to be anything like that
in the future.

- quote -

On a percentage basis with such a small account, this fee will eat you alive.

- quote -

Excellent point. You simply cannot find a cheaper expense ratio than the TSP.

- quote -

True, but the TSP offers an opportunity that is not available anywhere else:

The G Fund

The G Fund is a bond fund that has:

Zero credit risk (because it's invested solely in special securities
issued by the Treasury).

A yield that's about what you'd get in an intermediate bond fund.
(Currently about 4.5 percent.)

And a net asset value (share price) THAT CAN NEVER GO DOWN.

That's because the G Fund has an intermediate maturity, but a duration
that's measured in days.

Pretty cool, yes?

- quote -

One last point -- If the original poster ever comes back to work for the
federal government he can pick up where he left off contributing to the
TSP
My advice? Leave the money in the TSP, put it all in the G fund, and check
back at age 70.

joshbilsky[at]gmail.com wrote:
- quote -


I think Bill's response was very informative and accurate. As he said,
whether you should or not depends on several factors.

Personally, I would likely transfer the money for convenience. There
would be no penalties.

However, should you decide to keep your money in the TSP, you might
want to join the TSP Strategy group. Its a group of Feds who are
attempting to work together to maximize their returns in the TSP.
Pay TSP allocation services are tracked and discussed also. Its at
http://finance.groups.yahoo.com/group/TSP_Strategy

<joshbilsky[at]gmail.com> wrote in message
news:1168405507.620435.74480[at]i56g2000hsf.googlegroups.com...
- quote -

some or all of it to a Roth IRA if you are under the income cap. Also,
consider contributing to a Roth each year after 401k contribution up to
employer matching amount.

Good Luck.
BeachBum

- quote -

You can roll your TSP in to an IRA or qualified employer plan (e.g.
401k) with no penalty. Whether or not you SHOULD do so is another
matter. Here are some things to think about:

1) Account fees. As far as I know, the TSP has no account fees. If
you roll your money in to an IRA, the IRA custodian will most certainly
charge you an account fee (especially because of the low account).
These fees are generally pretty reasonable, maybe $10 per year. On the
other hand, if you're enrolled in your company's 401k, you're already
paying the account fee for that. Rolling your TSP in to your 401k
won't incur any additional fee.

2) Expense ratios. The funds in the TSP have ridiculously low expense
ratios. The S&P 500 index fund, for example, has only a .05% expense
ratio. You'd be hard pressed to find expense ratios that low anywhere
else.

3) Roth conversion. Rolling your money in to an IRA opens up the
possibility for a Roth conversion. Whether or not the conversion would
be beneficial to you is beyond the scope of this post. You can find a
LOT of discusson on Roth vs. traditional IRA in this newsgroup.

4) Investment opportunities. As Elle pointed out, if you roll your
money in to an IRA, you'll have the full range of investment
opportunities open to you. If you roll the money in to your 401k,
you'll be limited by the plan's fund choices. However, some 401k plans
offer unique investment opportunities that you might want to take
advantage of.

5) Simplification. This is really a matter of personal taste. If
you're the sort of person who can't or won't keep track of a lot of
little accounts (or, like me, just doesn't want to), it's probably
worth your while to consolidate.

Lots of food for thought. Without knowing more about your situation,
my default advice is to roll the money in to an IRA and then do the
Roth conversion. The Roth is simple and it affords you more
flexibility with your money.

--Bill

Can't you roll it into a Traditional IRA? This will give you
more flexibility when it comes to investment choices.

I don't see major, if any, advantages of rolling it into a
401(k)...

<joshbilsky[at]gmail.com> wrote
- quote -

I currently have some money, only about $2k, in a government Thrift
Savings Plan (TSP) from a federal job I worked a few years ago. First,
should I bother rolling this over into my current 401k? Second, would
there be any penalties incurred by doing so? Third, are there any
advantages or disadvantages to keeping the investments, TSP and 401k
separated?

Thanks in advance.