just a typical financially illiterate American guy here looking for advice on how to make my retirement more financially fit. Soon I will be a U.S. federal government employee and will therefore have access to the Thrift Savings Plan. I figured this is a good time to refresh my savings strategy.
First, some information about me which might help to shape any advice you can provide:
- single, mid-30s male
- no dependents
- student loan debt: ~$14,000 @ 3.125% interest rate
Right now I have an American Funds account and a Vanguard account. Details are below. About 10 years ago, an American Funds advisor set up the American Funds account for me. He also provided suggestions on choosing an investment mix for the Vanguard account, which was available through my previous employer. Honestly, I haven't heard from the guy in years.
American Funds Account
All Return percentages are since fund inception date.
Investment Accounts, Class A Shares:
Fund Expense Ratio Return Capital Income Builder (CAIBX) 0.59% 8.95% The Growth Fund of America (AGTHX) 0.64% 13.52% New Perspective Fund (ANWPX) 0.75% 12.17%
Retirement Accounts (CB&T CUST ROTH IRA), Class A Shares:
Fund Expense Ratio Return Capital World Growth and Income Fund (CWGIX) 0.77% 10.46% Fundamental Investors (ANCFX) 0.60% 12.36% The Growth Fund of America (AGTHX) 0.64% 13.52% New Perspective Fund (ANWPX) 0.75% 12.17% New World Fund (NEWFX) 1.04% 7.99% SMALLCAP World Fund (SMCWX) 1.07% 9.62%
Through my previous employer, I have a Vanguard Plan C 403(b) account in which contributions were made pre-tax. The investment mix is 100% stocks. All Return percentages are since fund inception date.
Fund Expense Ratio Return PRIMECAP Fund Admiral Shares 0.32% 10.67% Small-Cap Index Fund Institutional Shares 0.04% 9.04% Total Int Stock Index Fund Inst Shares 0.09% 5.89% Windsor Fund Admiral Shares 0.21% 7.64%
Thrift Savings Plan
For 2017, the average net expense was $0.33 per $1,000 invested (source). Now that I have access to the Thrift Savings Plan, I need to decide on an investment mix and if I should move money from the American Funds and Vanguard accounts into the TSP.
- After taking Vanguard's investor questionnaire survey, it seems a reasonable TSP investment mix for my situation is to contribute 90% to the C Fund and 10% to the G Fund. The Lifecycle Funds sound ideal but their return since inception averages ~6%. Advice?
- Considering the high expense ratio of American Funds, I am thinking about closing that account and transferring the money to either Vanguard or the TSP. Advice?
- I have 3 months of pay ready for an emergency fund and was thinking about placing the money into either a Vanguard money market or high-yield savings account. Advice?
- Going forward, I am curious how financial advisors calculate an investment mix for a client. Is there a recommended formula that adjusts based on a persons age and financial situation? I'd love to see it.