Every year I take a look at the Allocations in my retirement plan Target Date/Lifecycle funds. I have Qualified Plans with both my (current) private sector employer and funds I left with TSP when I resigned as a Fed a few years ago.
If you look at the same Target Date (I’m focusing on 2030), the TSP has a much more conservative allocation than the Brokerage houses like Fidelity, Schwab, and Vanguard:
Here’s an interesting retirement case study for you.
Let’s take a former active duty veteran who resigns after 7 years of service and enters the civilian workforce in the year 2000. This purely hypothetical employee in turn contributes to a Defined Contribution plan (401k or TSP) during his years as a working stiff. He or she contributes to the maximum ‘match’ amount of the employer’s plan- That is, when the employer matches up to 50% of contributions on up to 10% of salary, he contributes 10%. When he is a Federal Employee, he contributes 5% to get the most of the TSP automatic and matching contributions (5% of salary). (Stop me if you’ve figured out who the hypothetical employee is by now).
Mmm- Yeah, I’m gonna have to ask you to save much more for retirement, okay?
Defined-Benefit Pension Programs (like your FERS Annuity and/or Military Retirement Pension) are headed the way of the Dodo Bird. Here’s a recent example.
The State of California recently illustrated the difficulty of running a Defined-Benefit Pension program. CALSTRS (the California State Retirement System) is a juggernaut of a pension fund that is designed to support almost 500,000 teachers, state employees, and municipal employees in retirement. Continue reading