TSP based PP

[beafet]

Here is what I am thinking of doing:

50% TSP G FUND
40% TSP C FUND
10% TSP S FUND

All in my TSP.

Then, in a Roth IRA - 50% TLT, 50% IAU

Any reason this wouldn't work out? Any suggestions to improve it?

[AdamA]

I think it's a very good start.

All of the funds you're using are appropriate. 

I would encourage you to diversify a bit more going into the future by:

1.  Buying some physical gold.
2.  Purchasing your bonds directly.
3.  Opening a few more brokerage accounts so that you don't have all of your savings with just a couple of institutions. 

[beafet]

Right now, I have around $1000 in my TSP, adding $50 a month to that. In January I plan to start the Roth (still trying to decide where). Once I can catch that up so that both accounts are even, I may consider diversifying further. I don't feel super secure about having physical possession of bonds or physical gold.

[AdamA]

Right now, I have around $1000 in my TSP, adding $50 a month to that. In January I plant to start the Roth (still trying to decide where). Once I can catch that up so that both accounts are even, I may consider diversifying further. I don't feel super secure about having physical possession of bonds or physical gold.

With that amount of money, I think your setup is fine.

As it gets to be worth more and more, you will probably start to feel a little bit of angst just using the TSP and one IRA account. 

[beafet]

That makes sense.

On another note, over the last 23 years or so, the average annual rate of return for the G Fund (what I would use for cash) was about 6%...If this were to continue, how would it affect my yearly return? I understand the PP average is close to 8%, right? And that assumes a 0% rate of return for cash? Is it reasonable to expect a 9.5% return using the G fund for 25% of my portfolio?

[AdamA]

That makes sense.

On another note, over the last 23 years or so, the average annual rate of return for the G Fund (what I would use for cash) was about 6%...If this were to continue, how would it affect my yearly return? I understand the PP average is close to 8%, right? And that assumes a 0% rate of return for cash? Is it reasonable to expect a 9.5% return using the G fund for 25% of my portfolio?

From what I can tell, the G-fund affords one the security of short term treasuries with the yield of longer dated treasuries.  I'm not sure how they do this, but I think someone on this board said it was basically at taxpayer expense.  Lately I think that's meant a yield of around 2%, which would juice your total return by about .5% (2 percent x 1/4). 

The problem with using the G-fund as your sole cash stash is that you can't buy gold or bonds with it within the TSP, so keep that in mind and maybe keep only half or 3/4th in the G-fund and another 1/4 in T-bills outside of the TSP.

[amp]

The first thing you need to do, before even concerning yourself with PP allocations and IRAs, is make sure you are maxing out the TSP agency contributions.  At $50/month, you're probably well short of that.

1. Get your TSP contributions up to 5% of your salary to capture the full matching contributions (it's a 100% return on your money!)
2. Then decide if you want to continue increasing your tax-deferred TSP contributions up to the limit (15% of salary or $16,500, whichever is less) or open an IRA or both

Otherwise, you are literally stepping over dollars (matching contributions) to pick up dimes (PP returns).

Just my 2 cents... keep the change!    ;)

[beafet]

Well, unfortunately I don't get a match since I am in the military. So wouldn't a Roth be better from tax purposes?

[AdamA]

Well, unfortunately I don't get a match since I am in the military. So wouldn't a Roth be better from tax purposes?

I think this is more of a personal thing.

It would be great to max both your IRA and TSP every year (regardless of matching status), but sometimes that just is not possible.

I like your original plan of contributing a bit to both each month if for no other reason than that your Roth will allow you to buy all 4 of the PP assets, whereas TSP only gives you two.

My personal opinion is that, rather than monkeying around with growth stock mutual funds (as discussed on another thread), you'll be very happy with your results 5 years from now, if you just start setting small amounts aside each month within your TSP and IRA. 

When you see the results you will be eager to start saving more of your salary within the PP.

[beafet]

Yeah, I would very surprised if I were able to max out even a Roth, at least for the next few years.