So I’m a 58 year old retired Federal employee with about 800k in the Thrift Savings Plan. I receive a monthly pension and a supplemental social security payment. I have been retired for @ 2 years and so far I have avoided dipping into my TSP. My wife is still employed. She’s 58 too.
I have moved all of my TSP funds into the G Fund since retirement. It’s currently returning @ 3.5%. I’ve been thinking about rolling over a portion of my TSP to a private bank CD IRA. I can get a 9 month CD for 5.5%. I was going to ladder about 500k of my TSP funds into three different banks (FDIC Insured). I know the longer the cd terms, the lower the yield, but I would still be beating the G fund.
Questions: Is this a good strategy to earn a little more before I start having to dip into my IRA’s? I think I should be ok until my mid 60’s before I have to touch any of it. The TSP has probably the lowest administrative fees for their IRA accounts. Would I be paying higher fees with the private banks? Can I move IRA money back to the TSP when the cd’s expire? Thanks in advance!
You’re smart to be looking for higher returns. However, I don’t think moving it out of the TSP for a bank CD is a great idea. Once you move money out of the TSP, you can’t ever move it back.
Honestly, everything in the G Fund is a mistake, no matter who you are. Your biggest risk isn’t from market loss or even from fees, it’s from returns not keeping up with inflation. I’d suggest moving your entire TSP into L Income. That fund is 59% G Fund, but it also has some in stocks to help keep up with inflation. If you want this money to last into your 80s or 90s, you’ll need to return more than 3.5%.
As @rathbert2k indicated, your asset allocation is very conservative. Perhaps you have a shorter expected longevity or your spouse has equities in her retirement accounts. The retirerment decummulation decisions are more complicated than the asset accumulation phase. Consider using a hourly fee fiduciary fiduciary advisor who is familiar with the TSP. Alternatively you could post further information to get additional replies.
Look at CD rates at Vanguard, Fidelity or Schwab. For example Vanguard is offering CD rates up to 5.65% for 10-12 months and Vanguard does not charge for CDs purchased on the primary market.
Move Money Into the TSP | The Thrift Savings Plan (TSP).
If you withdraw money from your TSP and put it into a bank CD, then you can ONLY move IRA money back to the TSP IF your CD was also INSIDE an IRA account. In other words, you WOULD NOT want to make a Withdrawal from your TSP account, but instead a transfer of the IRA money from your TSP IRA to a bank IRA account. That is the important step to keep the money inside a tax-sheltered IRA. Like others said, if you are looking for higher returns, forget the CDs and move money to the TSP “L stock fund”.
I thought you couldn’t rollover into the TSP unless you were employed, but the link doesn’t say anything one way or the other about that being a requirement. I guess I should have left a few bucks in my TSP account when I took it all out to do a Roth conversion (before that was an option in the TSP).
The TSP as you know has some unique rules. I previously rollover most of my TSP to an IRA because the TSP does not allow QCDs. I now want to maximixe my QCD, so I am planning to rollover the remaining TSP balance.
Thank you all for your advice!
If I do transfer some of my TSP funds to CD’s, I would do an IRS Rollover to keep from incurring distribution taxes.
As I mentioned, I get by on my pension and SS benefit for now.
My wife is still working and will be for the next 4 years or so. I have her 403b invested in stock mutual funds through Fidelity. So we are getting some growth there.
I was taught if you don’t need to take risk with your money in retirement, then stay in conservative investments. I invested heavily in the stock market while employed. Now I just want to preserve my assets and get the best growth without too much risk. CD’s seem to be a good choice. I will look further into it.
If you want to be conservative and stay with fixed-income investments, there are some other options. Bond mutual funds have a slightly higher risk than bank CDs, but can offer more monthly income. Many corporate bond funds offer automatic monthly or quarterly withdrawals of the accumulated bond dividends. You can have a dividend check sent directly to your bank checking or savings account, so it is an easy investment to gain some additional regular income. You can find bond funds that pay 9% to 11% (For example, the Blackrock Floating Rate Funds.)
At your age, I would not have all of my retirement assets invested in such conservative vehicles like CDs and the TSP G fund. If you expect to live at least an average lifespan, in your case 20 more years, then I would have at least some of that 800k invested in equities like the C fund or something similar. You’re going to need some long-term growth. 5.5% in a CD may sound great but after 3% inflation and paying taxes on the earnings, you are barely breaking even (if that).