Ask The Experts: Money Matters

By Mike Miles

TSP advice

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Q. I turned 70 years old in July and have been a CSRS retiree since 1997. I started the required minimum distributions in September 2012 from the Thrift Savings Plan and an IRA with DWS Scudder. Monies were invested in the G Fund with TSP and the DWS GNMA S Fund, which are very low risk.  Before retirement, I felt more comfortable taking risk. I started withdrawing RMD only because I had to avoid penalty. My main concern at this stage in my life is to face as little risk as possible and to at least maintain my balance with minimum losses. My IRA over the past year has taken a heavy hit. Although both funds are invested in the GNMA, the fund with DWS Scudder with the highest balance has suffered the most and the shares are valued a little higher in cents.

I was thinking of transferring my DWS Scudder account to my TSP. Since I am not in desperate need of the money, how do I allocate my allotments to minimize my losses? What is a very safe investment with the RMD money received? My TSP is paid in monthly installments and DWS Scudder once a year. The TSP account doesn’t seem to change it value other than the amount of money that is being deducted for the RMD. The account doesn’t appear to show gain or loss. Am I noticing more loss with DWS Scudder because of maintenance fees and higher balance? What is your advice on this matter?

A. Mistakes can be costly, and you’ve made several of them. First: Your initial RMD is not due until April 1, 2015, so you have not been taking required withdrawals — you have been taking needless withdrawals! Second: You’ve subjected yourself to risk for no apparent reason. Third: You’ve invested in things and taken risks you clearly don’t understand. Fourth: You’ve incorrectly concluded that the G Fund has produced no gain in your investment’s value.

Based on the information you’ve provided here, I suggest that you transfer your IRA to the TSP account, if possible, and maintain your entire account in the G Fund. The G Fund bears no risk of loss and always produces a positive return on your investment. In fact, it’s the best risk-adjusted rate of return you’ll find anywhere. You’ll have to continue your monthly withdrawals from the TSP, but you may be able to reduce them until your RMD becomes due.

Unfortunately, there’s no way to recover the damage that’s been done. The time to get things right is when the decisions are being made, not after the fact. We’re all operating in a world where there are lots of very smart people doing everything they can to profit from our decisions. To get the most of what you want out of what you have, you must:

1. Clearly know and understand the rules of the game, and

2. Figure out how to use those rules to your best advantage.

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