Saving Solely In The TSP Can Be Bad | FedSmith.com (2024)

FAQs

Should I keep my money in TSP? ›

Leave it in the TSP and let it grow

Depending on when you begin retirement, you can simply leave the money in the TSP let it continue to grow. If you do not need to access it yet, it might be wise to let it be. Similar to other retirement accounts, you will need to begin minimum withdrawals at age 72.

The conservative funds are the G and F funds and the aggressive funds are the C, S, and I funds.

Your best bet is to stick with the C, S and I Funds. Here's the ratio we recommend for your portfolio: 80% in the C Fund, which is tied to the performance of the S&P 500. 10% in the S Fund, which includes stocks from small- to mid-sized companies that offer high risk and high return.

To receive the maximum Agency or Service Matching Contributions, you must contribute 5% of your basic pay each pay period.

Consider leaving your funds in the TSP unless you don't want to deal with extra paper work or you want more investment options. Otherwise, consider rolling your TSP account assets into your new 401(k) plan if you have one, or one of the other following options.

The G Fund is invested in short-term U.S. Treasury securities specially issued to the TSP. Payment of principal and interest is guaranteed by the U.S. government. Thus, there is no “credit risk.”

For the past 12 months, it gained 10.19%. So far in 2023, it has gained 11.74%.”

TSP contributions and investing should be top of mind when you begin your federal career. An employee who earns 50,000 per year and contributes 2,500 dollars with a 2,500-dollar match from the government can reach the TSP millionaire dollar mark in 25-30 years by investing aggressively.

TSP Performance Up in March and Year-to-Date in 2023

This is the index on which the C Fund is based. The C Fund is up 7.49% so far in 2023. The Fund with the best return so far this year is the I Fund which is up 8.63%. Some investors will note that the I Fund is near the bottom in popularity among TSP investors.

What should I do with my TSP when I retire? ›

Your TSP account is a portable retirement benefit. This means that when you withdraw your account, you can have the TSP transfer part or all of your single pay- ment or certain monthly payments to a traditional IRA or an eligible employer plan (for example, the 401(k) plan of a new employer).

Here are a few opinions. In The Elements of Investing: Easy Lessons for Every Investor , Burton Malkiel recommends these age-based asset allocations: 20-30s – bonds 10-25%, stocks 75-90% 40-50s – bonds 25-35%, stocks 65-75%

Employees should invest at least 5% in the TSP; that is the percentage needed to obtain the maximum available matching funds. Beyond that, Employees need to balance long-term investment needs against other needs.

Save a Percentage Instead of a Dollar Amount

If you feel daunted by your TSP plan, consider contributing the same percentage of your check per pay period, instead of a specific dollar amount. This way, if your compensation increases, the amount you contribute will increase at the same rate as well.

Experts say to have at least seven times your salary saved at age 55. That means if you make $55,000 a year, you should have at least $385,000 saved for retirement. Keep in mind that life is unpredictable–economic factors, medical care, and how long you live will also impact your retirement expenses.

Eligible rollover distributions of your traditional balance may be rolled over to a traditional IRA, an eligible employer plan, or a Roth IRA. taxed in the current year, and no income tax will be withheld. You won't be taxed on this money until you withdraw it from the traditional IRA or the eligible employer plan.

Leave Money in the TSP

You can leave the money in your Thrift Savings Plan account until April 1st of the year after you turn 70 ½. After that, you must start taking distributions.

Will withdrawals from my individual retirement account affect my Social Security benefits? Social Security does not count pension payments, annuities, or the interest or dividends from your savings and investments as earnings. They do not lower your Social Security retirement benefits.

The C Fund is a heavily diversified investment but it does come with the risks. The C Fund is moderately volatile and is subject to market risk as the price of stocks in the S&P 500 Index rise and fall. Further, you are exposed to inflation risk if your C Fund investment does not grow enough to offset inflation.

Your catch-up contributions will be in addition to the 2023 TSP regular contribution limit, which means employees can contribute up to $30,000 in 2023. To maximize the catch-up contribution amount of $7,500 for 2023, employees will need to contribute an additional $288 per pay period ($7,500/26 = $288.46).

When should I change my TSP allocation for 2023? ›

If you want your withholding percentages to be effective for the first payday of 2023, you must make the change in myPay before mid-December. The Defense Finance and Accounting Service and myPay usually require about three weeks to make any changes to your TSP withholding.

The TSP returns are off to a good start so far in 2023. Hopefully, TSP investors will be looking at a good return on their investment for the year after a disappointing 2022.

There are now just over 88,000 TSP accounts totaling more than $1 million. That's about a 15% jump from the roughly 77,000 TSP millionaires that there were at the end of 2022.

Best Performance Among Lifecycle Funds

The Lifecycle (L Funds) with the highest returns were the most aggressive funds as their percentage of stocks in the account is the highest. This means the L 2065, L 2060, and L 2055 provided investors with the best annual returns (19.90%).

This is a 14.8% increase since December 31, 2022 when there were 76,889 TSP millionaires.

July is Best Month for TSP Performance Since Trump Administration: One Fund Up 10.32% TSP performance in July was a bright spot in a dismal year for TSP fund returns.

Basic Info. Thrift Savings Plan C Fund Monthly Returns is at 0.43%, compared to 1.56% last month and -1.65% last year. This is lower than the long term average of 0.93%.

TSP Investors Down $120 Billion for Year; Average Account Loses $30,000.

At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative (40% stock, 50% bonds, 10% cash/cash investments); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).

Indeed, a good mix of equities (yes, even at age 70), bonds and cash can help you achieve long-term success, pros say. One rough rule of thumb is that the percentage of your money invested in stocks should equal 110 minus your age, which in your case would be 40%. The rest should be in bonds and cash.

Where can I park $100 000? ›

By age 50, you would be considered on track if you have three to six times your preretirement gross income saved. And by age 60, you should have 5.5 to 11 times your salary saved in order to be considered on track for retirement.

Each calendar month, your first two reallocations or fund transfers may be used to redistribute money in your account among any of the TSP funds. After the first two of either type of transaction, for the remainder of the month, you can only move money into the G Fund.

Age-59 ½ in-service withdrawals are withdrawals that you can make from your TSP account when you're age 59½ or older. We determine your age based on the date of birth reported by your employing agency or service. If that date is incorrect, you must ask your agency or service to change it.

The taxable portion of your withdrawal is subject to federal income tax at your ordinary rate. Also, you may have to pay state income tax. An additional IRS early withdrawal penalty of 10% may apply if you're under the age of 59½.

There are 3.6 million Federal Employees Retirement System participants, with an average account balance at the end of 2020 of $164,000. There are 287,000 Civil Service Retirement System participants, with an average account balance at the end of 2020 of $175,000.

Average TSP balances

The average TSP balance has grown steadily in the last decade, reaching the six-figure mark in 2013. As of 2021, the average TSP balance for FERS participants was $181,279, while the average TSP balance for CSRS participants was $194,424.

TSP Performance Up in March and Year-to-Date in 2023

The C Fund is up 7.49% so far in 2023. The Fund with the best return so far this year is the I Fund which is up 8.63%. Some investors will note that the I Fund is near the bottom in popularity among TSP investors. 3.6% of participant allocation goes into the I Fund.

Save a Percentage Instead of a Dollar Amount

If you feel daunted by your TSP plan, consider contributing the same percentage of your check per pay period, instead of a specific dollar amount. This way, if your compensation increases, the amount you contribute will increase at the same rate as well.

While they may not have as many funds to choose from, TSP participants do have one big advantage over most 401(k) investors: lower fees. The total expense ratio, which covers both investment and administrative fees, is 0.066% for individual TSP funds.

Do I need to report my TSP on my taxes? ›

With traditional TSP, your contributions go into the TSP before tax withholding, which can potentially lower your current income tax rate. But when you take money from your traditional TSP, you'll pay taxes on both your contributions and earnings at the income tax rate of the year you make the withdrawal.

We don't withhold for state or local income tax. This doesn't mean that you don't have to pay state and local taxes on your withdrawals and distributions. We report all TSP payments to your state of residence at the time of the payment (if that state has an income tax).

The inability to withdraw from specific funds, such as taking payments only from the G Fund while allowing the money in the other funds to continue to be invested. Limited investment choices: There are only five core TSP funds: C, S, F, S, and I. The inability to contribute to the plan after government service ends.

Does a TSP loan affect your credit? A TSP loan, like a 401(k) loan, does not appear on your credit report for the simple reason that it is your own money you're “borrowing,” so the only person you owe it back to is yourself.

You are responsible for paying taxes on the taxable portion of an in-serv ice withdrawal . We report all TSP withdrawals to the IRS—and to you—on IRS Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. We also withhold for federal income tax .