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By Mike Miles

Spread TSP over its five funds

July 20th, 2010 | Uncategorized

Q: I’ve been in civil service for 4 1/2 years. I’ve been in Thrift Savings Plan for about 3 years. I have my TSP invested 100 percent in the I Fund. I intend to work maybe another 10 years. I was thinking about putting 35 percent in the S Fund, 35 percent in the C Fund and the rest in the I Fund. The percentages are not set in stone but I am thinking about investing in the S Fund and the C Fund. Any suggestions?

A: I can’t provide specific investment advice through this forum — it would be irresponsible of me to do so. In general, I recommend that every investor identify the investment allocaiton that meets their needs with a minimum of risk, and periodically — at least once per year — rebalance their account to the appropriate allocation. In most cases, the right allocation will include all five of the TSP’s five basic funds. I can tell you that your current allocation, and the one you’re suggesting, is inefficient and subjects you to more risk than you need to take to acheive the expected returns they produce.

Tags: investment, TSP funds

Does using TSP to pay off loan exempt one from taxes?

July 20th, 2010 | Uncategorized

Q: First question: My wife and I are both in the Thrift Savings Plan, and we intend to retire in nine years. I heard somewhere that if I used my TSP funds to pay off my home loan and land loan that it will not be taxed. Is this true? I am under the GL scale and will have 31 years of federal service and four years of military service at age 57. My wife works for the Postal Service and will have 20-plus years of service at age 55. My second question is, if I decide not to withdraw from our TSP to pay off our loans, what is the best way to get the most out of my TSP? I don’t believe in nor trust the stock market, or any risky investments.

A: To your first question, that’s not true. To your second question, the only TSP fund not subject to fluctuations in value is the G Fund, so by process of elimination, that is your only option.

Tags: investment, TSP, TSP funds