If I had a dollar for every time I saw someone ask on an internet forum for the best TSP
allocation, I'd be retired on a beach somewhere instead of living in this frozen wasteland
called Wisconsin. I wish there were an easy answer for the best TSP allocation
However, I think it's actually like the Morpheus meme. What if I told you there was no best TSP allocation
What do I mean by this? The best TSP allocation for you depends on your lifestyle
Are you a caretaker for a disabled relative? Do you have health concerns that will be costly in retirement
Do you own real estate or expect a large inheritance? While I can't give you a personalized allocation percentage, I can talk about things you should
consider when creating your own personal best TSP allocation. Please note that I'm not a financial advisor and certainly not your financial advisor
This video does not represent an official position of the U.S. government and is not
legal, financial, or human resources advice. Understanding the different TSP funds. The CARES Savings Plan or TSP for short is a defined contribution retirement plan similar
to a 401k for federal employees and members of the Uniformed Services
The TSP does not use publicly traded mutual funds. Instead, the TSP has five core fund options
I'm going to list them off quick, but I have more information on my blog about these. Check out the links below in the video description
The C fund follows the S&P 500. The S fund follows small and medium cap stocks
The I fund follows international stocks. The F fund follows a broad bond index and the D fund is guaranteed not to lose money
In general, federal employees can build a TSP allocation from these five fund types
or life cycle funds comprised of these five funds. Why there is no best TSP allocation
Let's say you wanted to get stronger. Would you go to the gym and ask 100 people how much you should bench press
Of course not. The same thing goes for your TSP allocation. Depending on what your financial situation is, being too aggressive could leave you exposed
in retirement. So if your first pension will cover most of your expenses, being too conservative could
mean that you're leaving money on the table. Market timing and inter-fund transfers
Before talking about different asset allocation models, I want to be clear that these strategies
are for long-term investors. Your TSP contributions can grow throughout your whole career
TSP investors have the advantage of letting their contributions grow for long time periods
Over 80% of day traders lose money and the average trader loses 100% of their money within
a year. If you don't feel the need to hit a home run with your investments, sticking to a long-term
investment strategy over your whole federal government career is the easiest way to have
a large retirement NASDAQ. Famous TSP allocations for current employees. If you are a current employee, you are probably in a wealth accumulation phase
In other words, you're trying to grow your TSP balance so that you can one day live off
your assets in retirement. Current employees likely have a higher risk tolerance than retirees and therefore can
seek a higher rate of return. Here are some different models that people have developed for asset allocation during
the wealth accumulation stage. If you are closer to retirement or have other financial considerations, you may wish to
be more conservative than these models. Note that I'm not a financial planner, so please seek a retirement expert before making
a life-altering change to your retirement plans. J.L. Collins wrote A Simple Path to Wealth, a book that changed my life
He argues that the total stock market index, DTSAS, if you're a fan of Vanguard, is all
that you need. If you, like me, want to hold DTSAS in your portfolio, you can do that with holding 70
to 80% of your TSP in the C fund and 20 to 30% in the S fund
Finance guru Dave Ramsey is one of the most recognizable voices in personal finance
While he is mostly known for helping people pay off debt, he also talks about wealth accumulation
Like other voices, he recommends a portfolio with 100% equities. But he recommends a breakdown of 60% C fund, 20% S fund, and 20% I fund
Jack Bogle invented index funds and started Vanguard. The so-called Bogleheads, who follow Jack Bogle's investment philosophy, believe that
you need just three funds in your retirement portfolio. A domestic total stock market fund, an international stock market fund, and a bond fund
You could build your own three-fund portfolio with a combination of the C, I, and S funds
What about the life-cycle funds? We can't talk about TSP allocations without mentioning life-cycle funds
The TSP design these funds to have the best TSP allocation at every age for a federal employee
However, your idea of best might not match what the TSP thinks is best
In fact, the TSP's asset allocation is quite a bit more conservative than private sector
target date funds. For example, the L-2050 fund has about 18% less exposure to equities than BlackRock's
equivalent fund. Best TSP allocations for retirees. Retire markets don't have serious consequences for young employees during their asset accumulation phase
If anything, downturns help these investors purchase stocks on sale. However, once you reach retirement and begin drawing down your portfolio, you'll want to
have a more conservative portfolio. I'm not sure of anyone recommending that retirees have 100% equities in their portfolios. Conclusion
Is the best option none of the above? In this video, I've tried to strike a balance between providing information on what the
best TSP allocation may be and clearly stating that I have no idea what your finances are like
Personal finance is personal. Asset allocations depend on your age, but also your life situation
While the portfolios I've presented in this article are well known and work well for most
people, they may not be appropriate for you. As always, if you're unsure of what to do, meeting with a professional you trust can
be well worth it for the peace of mind. Thanks for watching, and please don't forget to like, subscribe, and turn on post notifications
if you haven't already. Those actions really help me produce more content for federal employees like you