By Mike Miles
April 21st, 2011 | Uncategorized
Q: I am 27 and I’ve been in the federal service for five years. All my contributions to the TSP are in the L2040. Since I do not expect to retire before 2040, I think the smartest move should be investing in the new L2050 fund. But my question is, should I move all the money that I already have to that fund, or should I just start investing in the L2050 and leave whatever I have in the L2040?
A: The TSP recommends that you invest all of your account assets in the L Fund that corresponds most closely to your retirement year. Of course, they make no promises regarding the results.
J. Daniel Wright Says:
April 22nd, 2011 at 8:54 am
The targeted retirement date is just an indication of the strategy based on past financial results. It doesn’t answer the real question you need to ask yourself when choosing your own strategy: what is MY risk tolerance?
If you don’t have the stomach for the higher volatility that comes with having a larger percentage of your assets in equities, then the L2040 fund is more suited for you. If you are willing to take a long-term approach, recognizing that your retirement date is 30+ years out, and ignore short-term market cycles then the L2050 fund is better for you.