Ask The Experts: Money Matters

By Mike Miles

Transfer to G Fund because of sequestration?

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Q. I am 37 years old, invested 100 percent in L2030. I have 25 years left to work, and I’m happy with 5 percent growth. I’m afraid of sequestration effects, so I’m planning to move 100 percent into G fund this week. I will move it back into L2030 after sequestration, when it posts three months of positive share price gain. Good plan or bad?

A. Bad.

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TSP and the fiscal cliff

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Q. I am a federal forestry tech (firefighter) and am facing mandatory retirement in 1½ years. I am wondering if the fiscal cliff will affect the Thrift Savings Plan like a couple years ago and the bottom will fall out. If so, would it be prudent to move my TSP more to more conservative accounts?

A. No one knows what the future holds, but market timing only adds unnecessary risk to your investment strategy. Select and implement the asset allocation scheme that supports your goals with the minimum of risk and stick to it. That’s the safest bet.

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C Fund to G?

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Q. I’m a 52-year-old federal employee serving in military status. I have the following in my Thrift Savings Plan account: C Fund — $145,000; G Fund — $30,000; F Fund — $10,000; and I Fund — $7,000 for a total of $192,000. I have other IRA investments of $70,000. I plan to buy back about eight years of military service for my federal retirement. My risk level is somewhat moderate, and I wanted to know if I should move a percentage of my C Fund into G? The fiscal cliff concerns me. I’m not sure if I’m balanced in my approach. I do not expect to retire as a civilian until 65. Thoughts?

A. I can’t tell you what to do since I don’t know nearly enough about your circumstances except your current TSP allocation of 75 percent C Fund, 16 percent G Fund, 5 percent F Fund and 4 percent I Fund — basically 80 percent stocks, 5 percent bonds and 15 percent cash — would be considered aggressive by most objective standards, not really moderate.

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Using rollover to repay TSP loan

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Q. I have a Thrift Savings Plan loan that I would like to pay off and was wondering if there was a way to do it by transferring funds from my personal IRA.

First, would a direct transfer work at all? Is there any way to designate that transfer to count against the loan?

Second, since I should pay back the loan with post-tax funds, if I do a rollover from a Roth IRA, can I then put it in the TSP as a loan payment?

Because I’m under 59½, will I get the early withdrawal penalty, even though I am rolling it into the TSP?

A. You may not use a rollover, from any account, to repay a TSP loan.

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L2020

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Q. I am looking for some feedback on information received from a financial adviser. I have been in the L2020 fund. The financial adviser is primarily for military and federal employees. He indicated that the L2020 fund currently has 60 percent in stocks (C, S and I funds) and 40 percent in fixed income (G and F funds).  He had suggested conducting an interfund transfer to allocate 65 percent to stocks and 35 percent to fixed income.  The formula would be 25 percent C, 20 percent S and 20 percent I funds, equaling 65 percent.  The second equation would be to put the 35 percent into the G and F funds. Any further contributions would be allocated to these funds. I chose the L2020 because I not an expert in financial investing. What are your thought on this particular formula?

A. The appropriate allocation for your Thrift Savings Plan account should depend entirely upon the demands that will be placed upon the funds in the future. Your account should be managed to meet your objectives, so I can’t possibly give you advice without understanding your financial goals. The decisions about how your account is invested should be made by the person who is responsible and accountable for the results those decisions produce. It doesn’t sound like you trust your “financial adviser” to make those decisions. Is that adviser accountable for the results — that is, your standard of living in retirement — they produce? If not, I suggest that you find an adviser/manager who is worthy of your trust.

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TSP to IRA

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Q. I have the same question as I found on your site: “Q. I would like to take a portion of my Thrift Savings Plan balance and transfer it to a self-directed IRA. What is the process for doing that? What are the estimated costs and penalties? A: In your circumstances — actively employed and younger than 59½ — the TSP won’t allow this.” But I am 61 years old and in civil service for 34 years. You imply in the above answer that over 59½  might be OK. Do you recommend this, or can there be possible problems?

A. You could take an age-based, in-service withdrawal and roll it over to an IRA. The cost of doing this will be higher investment expenses and the loss of access to the G Fund. I don’t recommend this unless you have a good reason for doing it.

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G Fund or L Fund?

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Q. I just changed my contribution allocations from 100 percent G Fund to 100 percent L Fund 2030. Would it make sense to transfer my fund balance that I earned with G Fund to the L Fund?

A. It’s impossible to give you reliable investment advice without the proper analysis and understanding of your unique circumstances, goals and constraints. How you manage your investments should depend directly upon what you expect that money to do and when. In general, though, unless the G Fund is holding money that is to be spent within the next few years, or that is part of a larger investment allocation, the appropriate L Fund would probably be a better choice.

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IRA transfer into TSP

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Q. I am planning on retiring within the next two years. I have a few IRA investments that I would like to transfer to the Thrift Savings Plan, but when I retire, will I be able to them leave there, or do I have to liquidate all my accounts in TSP when I retire?

A. You may continue to maintain and manage your TSP account for as long as you live. You may also transfer eligible assets into the TSP at any time, for as long as you maintain the account.

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TSP fund transfers after retirement

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Q. Can you still transfer your Thrift Savings Plan balance between funds after you have retired and started receiving monthly payments based on life expectancy or a specific dollar amount?

A. Yes.

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G Fund to L Fund

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Q. Can I move the total amount of money in the G Fund over to the L Fund?

A. Yes, if you have not already requested two interfund transfers during the current calendar month.

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