Bond Allocation and TSP G/F Funds

[tiernado]

I just fired my financial advisor (yay) but am now scrambling to re-allocate a portfolio with a joint taxable account, my own TSP, husband's 401/457, and Roth IRAs for both.  I am using all index funds and have it mostly figured out in regards to stock/bond allocation (80/20) and then allocation within the classes.  Spreading it out efficiently is painful, but that's not my immediate issue.

In regards to the 20% bond allocation:  I was thinking about 15% bonds, 5% TIPS.  Assume total assets of the above accounts is $2M, so that I will put $400,000 into bonds.  Some or all of that could go into:  G Fund, F Fund, Schwab US bond index (SWAGX), a Barclays US Aggregate Bond Index, Schwab TIPS ETF (SCHP).

Access to the F and G Funds is throwing me off.  I could cover all of my bond allocation in my TSP, but don't know if I should (would a bond index fund offer something they don't?).  I see a lot of praise for both of those TSP funds, and believe that the G fund offers some inflation protection but not in the same manner as a TIPS fund.

The other consideration is that we might start using the 457 first in early retirement, but the bond index fund in there costs 19 basis points compared to 3-5 for all the other options.

Suggestions on how to do my bond allocation?  How much G, F, bond index, TIPS?

Many thanks!

 

 

 

 

 

[The White Coat Investor]

There's no right or wrong answer. If you're going to use TBM, might as well use F. It's TBM with a slightly (very slightly) lower expense ratio. I'm a big fan of the G fund and have 10% of my portfolio in it. Think of it as 10 year treasury yields with T bill risk. It's currently paying 2.375%. That doesn't sound like much, until you compare it to something with similar risk like the Vanguard Prime MMF paying around 1.25%.

I like TIPS as well, putting the other 10% of my bond allocation there. But it's not like leaving those out of your portfolio all together is wrong. They certainly haven't paid off yet in my investing career (they pay off when unexpected inflation hits and it hasn't for quite some time.)

[DMFA]

What do you want that portion of your portfolio to do?

F = VBTLX or any bread-and-butter Barclays US Aggregate tracking fund.  This can actually lose value (and did in 2013) but usually beats G by about 2%.

G = fairly unique government securities fund which will p much get you inflation plus maybe 1%.  Preservation of capital is guaranteed.

You could consider using F for your vanilla bonds and G for where you would have put TIPS or T-bills.  Totally up to you.

[StarTrekDoc]

This is same strategy I will be following as we shift over from a growth to income preservation mode over the next ten years -- Shift the TSP accounts to at F+G mechanism and the equities in the nonFed 403/457 accounts with Hitting in this order

457, 403, TSP until 25% income tax mark and cover with ROTH IRA at that point for the year....so goes the plan at this time.