5 Tips to Be Successful With the Thrift Savings Plan
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.