No longer in military but working. I already have a Roth TSP account but of course, no longer get matching funds. Should I continue to contribute to Roth TSP (L4050) or just open a Vanguard Target Retirement Fund? I plan to just leave current funds in TSP but don’t know whether to add the allowable $6000 per year or put in Vanguard fund.
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The advantage of the Roth is that you have more control of the distributions rather than what I call the end of January Surprise.
I am not a big fan of Target Funds. They appear to be too conservative. If you want target funds… push the date out 5 to 10 years. This will make them less conservative. At some point you may want to switch to Vg Index Funds… VTSMX
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I assume VTSMX has more stock investments. I have two Vanguard accounts. One is a IRA rollover in Wellington. The other is target 2045. If I were to change the 2045 into VTSMX, how would I go about that? Would I incur fees?
So only government employees can contribute to TSP?
Same contribution limit for a Traditional IRA, $6,500.
For those 50 and over they can do an additional catchup contribution of $1,000 for a total of $7,500 IRA contribution for 2023.
Only federal employees can contribute to the TSP.
https://www.tsp.gov/tsp-basics/how-tsp-fits/
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Target retirement funds are too conservative and have too much in international stocks often in excess of 35% of the equity holdings thus having 100% in target funds is sub optimal. You may want to have 50% in target funds, 0-10% in bonds, 20-30% in large cap stocks and 10-25% in small cap stocks
L2050 is for government employees; it has 18.25% in fixed income which is perfect for someone retiring in 2038 or 15 years. In contrast, the Vanguard 2050 is in 10.53% bonds or 89.47% stocks. If you use the 130-age, that’s appropriate for a 40 year old or someone retiring in 25 years or 2048.
Most target date funds have only 30% in stocks. If stocks earn 10% and bonds earn 4% a 50/50 portfolio nets around 7% which barely covers 3% inflation and a 4% withdrawal rate. A 30/70 portfolio in turn only earns 5.8% thus reducing the withdrawal rate to a mere 2.8%. A 70/30 portfolio by contrast may have an aggressive withdrawal rate of up to 5% though you will likely need to drop your withdrawal rate in half during a down or stagnant market
I’m just going to clarify that TSP is military and civilian federal employees.
Civilian employees get a match, 5 for 5
Military members under BRS get 1% to start then up to 5% match after two or three years. Those who joined before 2018 and did not switch to BRS do not get the match.
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