Question re: 401k and future allocations.

I appreciate that; just looking for input from folks on here - many seem pretty sharp re: $ matters.

Good points. I didn’t know about the widow penalty so thanks for that,

Slightly off topic but have you considered moving out of TSP into an IRA?
TSP no longer has lowest expenses, their user interface and customer service is awful, and limited investment choices (new fund window is excessively expensive). I've meant to move mine but when TSP switched service providers a couple years back there were so many issues w people trying to access their $ I just figured I'd wait for it to settle out. Also, TSP has some strict rules about non spouse heirs and if I remember correctly if my kids inherit my TSP after my spouse they cant do a rollover to inherited IRA but must take a lump sum payout and a massive 1 year tax hit. I dont want to bank on her rolling it over after I die not to mention if we both pass in short sequence due to accident etc.
Another TSP consideration; if you ever contributed tax exempt funds in a combat zone that are sitting in traditional TSP (from before Roth TSP was a thing like I do and I'm slightly younger) The growth is taxable as long as it sits in TSP. But that tax exempt balance can be rolled into Roth IRA (no tax on conversion) and starts to grow tax free. I just havent gotten around to moving mine and dont trust TSP not to dick it up.

Thank you for the advice, appreciate you taking the time to write it up.

Looks like TSP fees (.036 for C) are pretty low; where are you seeing lower?

Same tax issue would apply no matter who she passes it on to other than a charity. Just might want to let her know it's best to rollover into IRA instead of sticking w TSP if you pass first.

Eta: I dont know when the above chart's performance data is from so comparison is likely out of date.

Just remember. The probability of failure goes up as equities decrease in a portfolio.

At 51 you’re still fairly young. I wouldn’t be looking to go in to bonds too intensely as a whole. You still potentially have 30-40 years of inflation and life to make it through.

The probability of “running out of money”, not being able to have adequate money coming in adjusted for inflation, healthcare costs, etc. goes up as equities in the portfolio decrease. One risk you create for your portfolio is longevity risk.

What I do is 3-4 years of income in bonds. The rest in equities. Mostly high bluechip dividend equities. I withdraw from the equities during good times. Then during market/economic drawbacks, I withdraw from the bonds for more stable income and also giving time for the equities to rebound. Also gives for some uncorrelated cash to be able to invest in the equities side when the market is down.

Too many people look at fees when they should be looking at is Alpha, Standard deviation, and sharpe ratio. This doesn’t even include the internal cost basis for the securities they hold, which can impact investors even without them selling their fund shares. They will hurt/kill these things just to say they got the lowest fees.

Thanks for the explanation.

Is there a “rule” that shows how much return is needed averaged over time and inflation? I have read about the “4% rule” re: withdrawals but when I do a little math, that burns out in 25 years using no independent parameters such as inflation/fund performance.

3-4% is a good “rule”. But it doesn’t work well with too much equity or too much fixed income. Works better with more equity than more fixed income though.

That’s why I do the approach I was talking about. A 100% equities over the last 20-30years shows the highest income withdrawal amount. The problem is in dollar cost ravaging. The systematic withdrawals of income (especially when there is a drawback or volatility) is what hurts the most. Selling shares of equities during downturns and compounding that loss. But a good balanced portfolio that is creating good alpha with as little standard deviation as possible (really as much as you can stomach in retirement). It’s much easier to make it to retirement than it is to make it through retirement. Because just passively taking what the market gives you is not a recipe for success.

What I look at is if I put all of my money in high investment grade bonds what would my income be without principle. Let’s say it’s 3, 3.5, or 4% and that comes out to $100k a year. Then I allocate the portfolio accordingly like I said above and use that for the withdrawal. Moving a month or two ahead in to cash to avoid the risk of the dollar cost ravaging as much as possible also.