Saving for retirement now can set you up for financial success in the future. Whether you’re on active duty or separated, your retirement savings are key to reaching your goals and having the quality of life you want. Here are tips to help you be successful with the Thrift Savings Plan (TSP).
Increase Your TSP Literacy
You’d be surprised at how many people don’t know the investment options within the TSP. How can you make an informed decision about how to invest your money if you don’t understand what each fund is and the objective of the fund?
You’ll find great success with your account if you take the time to do a little homework on the Thrift Savings funds. TSP.gov is a wealth of knowledge on the different funds, the indexes they replicate, and the fund goals. Knowing those things can help you decide which funds are best for you, your goals, the time you have until retirement, and your risk tolerance.
Contribute at Least 5%
Hands down, the best thing you can do is to actually use the TSP. It sounds simple, but many service members never started contributing to the TSP, or if you’re under the Blended Retirement System, you went in and stop contributing. To earn gains on your TSP for your retirement, you have to contribute in the first place.
Making monthly contributions to your TSP is the best thing you can do to be prepared for retirement. Be sure you’re contributing at least 5% (but more is better) to receive the Department of Defense match. It’s free money that can help you grow your retirement nest egg faster. If you don’t get the match you’re losing money out the gate.
Don’t Play it Too Safe
Yes, you want to invest in a way that you can sleep at night, but you also need to take a little risk to get the rewards. You don’t want to leave all of your money parked in the G Fund. If you do, you’ll end up losing money because often, the G Fund return isn’t greater than the rate of inflation.
Take a risk tolerance questionnaire and see where you end up. You might be comfortable with taking a little more risk than you realize. Or you can find a mix you’re comfortable with that will give you some returns. For example, you may be 100% in the G Fund but find that 70% in the C & the S Funds and 30% in the F Fund is a good fit for you.
Review Your TSP, Please
Another simple tip, but not many people do it. Your TSP is not a crockpot, you don’t set it and forget it. What gets measured gets improved. Reviewing your TSP allocation every 6 months or year can help make sure you’re still invested in a way that works for your goals, timeframe, and risk tolerance.
Set calendar reminders to ensure you take the time to review, access, and change your TSP allocations as needed.
Don’t Take Loans
If you take out a loan, you’re taking money away from your 80-year-old self. Don’t do it. If you think your financial situation is hard now, try being 80 and needing to get a part-time job to cover your expenses. Taking loans from your TSP will greatly reduce the amount of money you’ll have in retirement.
In some extreme cases, you may need to take a loan from your TSP, like a family medical emergency. But if you are thinking about taking a loan from your Thrift Savings for a Disney trip, think again. You will only be hurting your future self.
Have a Plan for Your Account After Service
Just because you get out of the military, doesn’t mean you need to transfer your TSP to another employer plan or roll it over into an IRA. In fact, in most cases, it’s best to leave your TSP right where it’s at. When you leave the military, you can no longer contribute to your account, but you can still keep it invested and earning money.
There are expenses to invest money, and the TSP has some of the lowest expenses ratios for their funds. So your new employee may have similar funds with similar rates of returns, but the TSP is probably cheaper to use.
Tips are good but putting them to action is the big step. If you haven’t already, start contributing to your TSP. Make sure you’re contributing 5%. If you’ve set your TSP and forgot about it, review it. Increase your contributions. Take action to reach your financial goals and the quality of life you want.
Lacey Langford, AFC®, is a financial coach, writer, and speaker who changes people’s mindset from being fearful of money to having control and confidence with it. Money + military is her jam.
She’s the creator and host of The Military Money Show, a podcast dedicated to helping the military community make, save, and invest money wisely. She’s also the founder of LaceyLangford.com, a personal finance blog and coaching practice specializing in the unique world of the U.S. military. Lacey is also the founder of MilMoneyCon a national conference focused on bringing together military and financial professionals.
Lacey’s a veteran, military spouse, and an Accredited Financial Counselor® with over 15 years of financial planning, counseling, and coaching experience.