Contribution Allocation and Interfund Transfer
Over the past several months, I have received more questions about Contribution Allocation and Interfund Transfer than any other topic. The terminology doesn’t seem to make much sense but, once you get the idea, it’s very simple to understand and execute.
My current allocation since May 17th has been 50% C Fund and 50% G Fund. That means I went to www.TSP.gov and did 2 things. After logging in, I completed a Change of Fund Allocation and an Interfund Transfer. The Change of Fund Allocation told TSP where, and in what percentages, I want my new contributions going every payday. The Interfund Transfer told TSP where, and in what percentages, I want the money currently in my account.
I ALWAYS complete both a Change of Fund Allocation and Interfund Transfer at the same time, to the same funds, and the same percentages. If you made the changes on May 17th then your picture should look a lot like mine below.
The Contribution Allocation is the percentage that you set in the Change of Fund Allocation and will always be fixed at what you set.
The Account Distribution is a snapshot of where your current balance is distributed. This will change as the market price of the TSP funds that you’re in change.
I hope this simplifies things things. If you still have questions, please post in comments or hit me on email.
Jerry
The Interfund Transfer – I’ve never done this and do not see an option to (the photo above gives a 404 error, not showing). Why is this important to do both?
You have 2 buckets of money in TSP. The first is what you currently have in your account. If you want to redistribute the money that you already have in your account between different TSP funds, you execute an Inter-Fund Transfer (IFT). The second bucket of money is the new money that you contribute each payday. To tell the TSP which funds to buy with this new money, you do a Change of Fund Allocation. I always do both a change of fund allocation AND an IFT at the same time. That way, all of my TSP dollars are in/going to the funds that I want. It makes it very simple to keep track. For example:
If your IFT is 100% S fund then 100% of money in your account gets distributed to the S fund. If your fund allocation is 100% G fund then, a month later, when you look at your account page at TSP.gov, you’ll wonder why you have money in the G fund when you did an IFT to the S fund. It’s because you told TSP to put your new contributions into the G fund. Makes sense?
Thanks!
I recently did an ift of over 500 thousand 100% to g fund. I am inside 5 years of retirement. I am starting new allocations in c s and I. Most in c. I dont think I will do as well as I have with the new administration. Was it a smart move? Is my g fund safe? Will I make ANY money in g fund? I dont want to lose any bulk of my savings.
Thank you
Hi Rex,
The money that you transferred to the G fund is now as secure as it can be and is accruing interest at a rate of 1.375%. That’s a LOT better than the interest rate you would get in a savings account at your local bank. Right now, the average savings account interest rate is 0.04%. If you are planning to use the $500K to buy a house or pay off debt in retirement, then reallocating that amount to the G fund could be a very wise move. The money will be there for your identified need. If you don’t have an identified need or use for that money in retirement, that’s a different conversation…
Hello Jerry. I am thinking of doing an IFT to the G fund but I have a concern. I currently have 25% of my distribution in the C fund and 40% in the S fund. The C fund per share today is $62 and the S fund per share is $80. If I transfer money from the C fund and S fund to the G fund will I lose money since the G fund is only $16.58 per share? Or when I transfer the money/shares, will it be locked in at the current price of the C & S funds? Thank you!
Hi Joe,
Great question! First off, you are correct to view your account in terms of percentages. You do not lose money based on the share price of each fund. If 25% of the value of your account is in the C fund, and you reallocate that % to the G fund, you would have the same dollar value in your account after the reallocation. If you make your reallocation request before noon East Coast time, you will get that days closing price. If your reallocation request is submitted after noon East Coast time, you will get the following days closing price.
Awesome….thank you!
Hello,
Is Having New Money Allocated to G Fund,and existing Money to C Fund,smart to do?
Thank you.
You can do that, it just makes keeping track more difficult. I always keep my IFTs and CAs at the same percentages.
How can I double my tsp since I still have like ten more years to work and I really didn’t start moving my money from the G fund until now. I was scared before so being scared to loose I really didn’t gain much.
Hi Maribel. I wish it were that simple! We only have the 5 core funds in TSP. We can’t add riskier assets to our portfolio so, attempting to make big gains over a short time, like you possibly could in a regular brokerage account, just isn’t possible. The best we can do is to be in the stock funds when the market is trending up and be in the G fund, to avoid losses, when the market is trending down. Watch the Weekly Update Shows and you’ll get the idea of how we do this!
Jerry H, I am contemplating performing an IFT on my entire $409,000 balance into the G fund, but keep my Contribution Allocations the same. My thought pattern (and I could be totally wrong) is to save the $409,000 now in the event of a market downturn and basically start from $0 on New Contributions. I realize there is risk losing future gains if the stock market continues to grow; however, I’m also protecting my balance in case the market drops like a lead balloon. Your thoughts? Rick H
Hi Rick,
Great question! My first question would be, how many years until you retire since that’s when your contributions would end. Second question is, when do you plan on beginning TSP withdrawals? There is a lot that goes into answering your question but, the bottom line is your personal circumstances and risk tolerance. If you reallocate the $409k to the G fund then you have removed all market risk but, also locked in a very low rate of return. You could be more risky with the new money coming in each payday but, that’s a maximum of $19.5k plus matching. If you don’t have many years left to contribute, the new money will not have much of an effect relative to the potential of the $409k. It comes down to what allows you to sleep well at night. There are no “wrong” answers… Hope that helps!
Jerry H, Thank you so much. Yes, your advice and the questions you ask are one’s I have to answer and then I can make the appropriate moves. Take care, Rick
Thanks Rick!
Hi Jerry, is there a fee attached to doing an IFT? Because it is basically selling shares in one fund and buying into another, which usually incurs a fee in the private sector. I understand the limit is 2 IFTs per month but are they free? Thank you.
Hi Liz. There is no personal fee attached to doing an IFT. The fees are part of the collective structure of TSP. Honestly, I wish there were individual fees for an IFT. That way we would likely not have the 2 move per month rule…
Hi i got about 3 years till i retire im thinking on putting 417.000 100% in g and play with new money 600 a month is this a good idea
It COULD be a good idea. It comes down to your personal circumstances, risk tolerance, what plans you have for the $417,000 in retirement,…
I would talk with a Fee Only Financial Planner.
I completed both an IFT and Contribution change allocation to redistrubute all of my funds from 100% L fund to:
38% G,
29% C
16% S
17% I
which total = 100%. My account balance reflects the change in the contribution allocation distrtibution column but in the distribtuion of account column it shows:
80.46% L
4.54% G
4.98% F
1.46% C
8.44% S
12% I
Why are the L and F funds in the distribution column? What am I not understanding?
Hello Ian. You are presenting an interesting question. I would definitely call the TSP help desk on Monday morning (before noon EST) and ensure your allocation is correct. The help desk is the only place that can resolve this.
Hi Jerry! I have a similar question as Rick. I have 100k in the G fund. I have 20 to 25 years to go until retirement. I want to keep the 100k in G for protection. I recently changed my new contributions allocations to 45%C, 30%S and 25%G. So basically being aggressive with 75% of my contributions from here on. First, what do you think about this as a moderately aggressive approach? And 2 do I understand it correctly that my 100k will sit protected and my future contributions will reflect the 44/30/25 split. I’m viewing this as two pots of money. Or do the new contributions somehow tie back in to the 100k G fund? I hope that makes sense
Hi Chelsey. First, congrats on focusing on TSP early in your career! With 20-25 yrs to go, you can make some huge gains!
If I understand your question, you have 100K in the G fund that you want to treat as a savings account. Now you want to begin being aggressive with new contributions to TSP each payday. I’d say that’s an extremely conservative way to play this game given that you have 20+ yrs until retirement. How long did it take to generate that first 100k? The second 100k is much easier ONLY if you use the first 100k to help you get there…
The answer to your second question is a bit complicated. Your account should reflect 100k in G that will increase each payday by the 25% from the contribution allocation. You will also start to see the C and S funds grow. Your contribution allocation split will remain the same until you change it but, there is no automatic rebalancing. What you have in your account (C and S) will be based on how those funds perform. For rebalancing, you need the L funds. Hope all that makes sense 🙂
Hi Jerry: Hi Jerry: From your responses to all the questions from several persons, what I understand is that the % in current investment allocations for the funds (already saved money) need to be the same as % for allocations for future contributions. If the % are not same, the TSP managing folks will distribute the future money as per the % for current investment and one can be at a loss. For example, if one has 10% C fund in current investment allocation and has 20% C fund allocation for future investment, he/she could buy C fund at a higher price and that gets distributed to other funds resulting in a loss. Do I understand correctly? It is shame that the TSP site does not educate federal investors on such things. They just have only guidance on how to do interfund transfer and how to change future allocations.
I agree Sanjiv. The level of education provided by the TSP site is lacking. You are correct. Contribution Allocation tells TSP where to allocate your new contributions each payday. IFT tells TSP how to move the % of funds already in your account. Once funds are contributed, they become part of the overall account and are redistributed when you submit your next IFT. The larger your TSP nest egg, the less this matters since the largest gains/losses come from the movement of price in the funds in which you are invested. Your contributions have lees of an impact the larger your account grows.
Hi Jerry: Thank you so much for a prompt response. It is confusing and concerning that even in the absence of an interfund transfer, the new money, no matter how you allocate, will be distributed to the funds as per the % allocation one had made in the past via IFT. Is this true? If this is true, does this distribution happen once a month or quarterly? Thanks.
Sanjiv, that is not true. The new money gets contributed based on the Contribution Allocation (CA) that you set. let’s say your CA is set at 100% C fund and your last IFT was to 100% G fund. After your next payday (contribution) your account would show that amount in the C fund and the balance in the G fund. Makes sense?
Hello, I have 100% of my contributions and interfund transfers in my tsp in the L2030 ($250,000, I started late with tge gov’t and lost a bunch in a divorce) as I thought I was eligible to retire in 2029. But I realized that I am eligible in 2026. Would it be wise for me to put 100% in the L2025 in contribution allocations and interfund transfer? Also, I don’t understand why the 2025 (and the other mid year L funds) are half the price per share. I’m a bit confused.
Lois, you’ve outlined a great example of our individual circumstances and risk tolerance. We can’t give personal financial advice. We are an educational service, utilizing technical analysis to keep you on the right side of the market. I would highly encourage you to watch the Weekly Update Shows and read through some of the Weekly TSP Newsletters to get an idea of how we manage our TSP accounts.
I recently went from 100% G to 50 G 50 C not wanting to miss out on the %15 decline in the C fund. I’m a couple years away from needing my 401K. Obviously the C fund has went lower. If I do a reallocation to put the 50 % in the G into the C fund if it hits 30% decline it will reallocate my total balance. Will I lose reallocating current 50% C to 100 % C ?
Hi Gene. Your 50% in the C fund now will continue to decline through the bear market. Your 50% in the G will continue to grow. When you reallocate to 100% C fund, if the market continues higher, you’ll get the full gains. Makes sense?
So if I have 75% in G and 25% in C, when C drops, money comes out of G to keep C’s balance percentage at 25%?
Hi Sandra. Absolutely not. The TSP does not automatically rebalance to keep your requested % allocations. You would need to do that manually. The L funds do automatically rebalance but, it’s based on their algorithm for each L fund.