New Book Aims to Help You Make Money in the TSP

By on October 27, 2011 in News

A recently published book aims to help federal employees understand the Thrift Savings Plan (TSP) and how to better make money using this valuable retirement preparation program.

W. Lee Radcliffe wrote TSP Investing Strategies: Building Wealth While Working for Uncle Sam primarily for neophyte investors who are not familiar with the TSP. He said when he first began his federal civilian career in 2001, he found the notion of investing in the TSP overwhelming and a little intimidating due to his lack of knowledge about the program as well as conflicting advice he got from his co-workers, so he began researching the TSP and developing and testing investment strategies against returns over time by following data from bull and bear markets.

The book begins by outlining the basics of the TSP and investing, detailing things such as what the TSP is and when it was formed, what funds are available for investors, how the stock market differs from an index stock fund, and how much the government matches your TSP contributions. The book also outlines scenarios to show investors the importance of investing and just how much money can be earned by allocating part of their paycheck to the TSP.

From these basic principles, it then goes into helping investors assess their level of risk tolerance. The book explains that each investor is different and that it is important to design an investment plan in the TSP based on your own personal level of risk tolerance.

To help investors determine their level of risk tolerance, the book poses four questions to them:

  • I like to check my TSP account every few weeks
  • I like to check how the U.S. and international stock and bond markets are doing from time to time
  • I like to read books on investing strategies to try and improve my investment results
  • When I hear the word “market,” I think of buying fresh fruits and vegetables, not stocks and bonds

Depending on how an individual answers these questions, Radcliffe explains to users what their likely level of risk tolerance is. He then presents some detailed and enlightening hypothetical scenarios, accompanied by sample portfolio values and graphs, to illustrate how the stock market can fluctuate (and subsequently an individual’s TSP account balance along with it) to really drive home what it takes to stomach some of the market’s ups and downs. He explains what it really means when a TSP fund’s value falls (a decline in a fund’s value is not the same thing as a loss), explains how much risk you should realistically consider taking in your investment strategy, and also illustrates how much intrinsic risk each of the TSP funds holds.

The latter part of the book contains investment strategies investors can follow based on what they learn about their goals and risk tolerance. The strategies the book outlines include:

  • How to allocate among the various funds based on your level of risk tolerance
  • Rebalancing your funds with the help of bi-weekly and monthly contributions
  • “Supercharging” your TSP account by investing as funds fall
  • Building further wealth by investing outside of the TSP

Radcliffe himself is still an investor in the TSP, and he said he follows the “aggressive” allocation strategy that he outlines in his book.

I had the opportunity to ask him some questions about the TSP and what he thinks of the program overall:

FedSmith: Has the current recession altered your advice in any way on investing in the TSP?
Radcliffe: No, the current recession actually reinforced my adherence to the strategies.  As background, I first outlined my ideas for the book in 2008, allowing me to test them over the subsequent three years.  Over that time, I felt much more secure knowing that my selected allocation shielded me somewhat from the downturn (since I was not invested 100% in the stock funds alone), while also providing opportunities to invest more as the stock funds continued to fall.  In the book, I also attempted to reinforce the more conservative allocations based on the experience of the past few years, so that participants who are less comfortable with risks in the stock funds can still feel more comfortable investing in a diversified mix of funds for greater long-term growth while also maintaining a more steady TSP account balance overall.

FedSmith: Do you think the monies in the G fund are secure given the growing federal deficit?
Radcliffe: Yes, I have total confidence that the G fund will remain secure over the long-term.

FedSmith: Syndicated financial columnist Scott Burns has called the TSP a model investment program – Would you agree with this statement?
Radcliffe: Yes, I agree that the TSP is a fantastic means by which participants can build wealth over the long term. Of course, individual participants in the TSP can still make investing mistakes that might cause them to suffer significant losses, which is why individual investor education is so important — I hope my TSP Investing Strategies book can help to fill that niche.

FedSmith: Are there changes you’d like to see made to the TSP funds or the overall program?
Radcliffe: Right now, I’m satisfied with the funds that are offered in the TSP. As I note in my book, TSP investors who want more options can invest a minimum in the TSP and pursue a more individualized investment program in a Roth IRA and/or a taxable investment account.

© 2016 Ian Smith. All rights reserved. This article may not be reproduced without express written consent from Ian Smith.

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About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

12 Replies

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  1. Hose3711 says:

    TSP needs to allow 1 or 2 more interfunds transfer a month, even if there is a charge per trade like Ameri-trade or Scott-trade. With all the cuts Congress wants to make to our retirement benefits, we’ll need every penny that we can get into our TSP account. Write to the TSP Program and tell them we need this.

  2. Hose3711 says:

    One change I would like to see happen is for the TSP Program to allow one more transfer per month, for a total of three interfunds transfers per month. Before 2008, my personal interest percentage hover around 26% to 28%. May of 2008, the TSP reduce our transfers from as many as we could make in a month, to only two. Reason being that many investors were making transfers at bad times and losing money in the market. Also, with all the trades , it was causing the program to become very costly to run. The program was not meant to be a forum for “day traders”, as they explain, and I agree, but there are some of us that have a financial understanding of the market and the TSP was a way for small investors to make huge profits in the stocks during their career as a federal employee. My personal percentage rate has fallen between 11% and 12%. Still a good return, but with all the cuts congress wants to make to our benifits the TSP is the last hope of a decent retirement. On a WG-08 salary, I have over $410,000 in my account and with just a little over 1 year before I retire I hope to at least have half-a million in my account. This can only be possible if Fedsmith reader write to the TSP and request that they give us more options on transfers. Companies like Ameritrade, Scott-trade, and other brokerage firm have a charge of only $7.00 per trade. Even if we are charge $25.00 per trade above 3 trades a month, we can inprove on our returns. Hopefully, Fedsmith will jump on this issue and lend a helping hand.

    • USPS Letter Carrier says:

      “Before 2008, my personal interest percentage hover around 26% to 28% … My personal percentage rate has fallen between 11% and 12%.”

      26-28% is pretty darn good but L2040 made 25% & 14% in 2009 & 2010. Surprised that you were unable to beat L2040 the last 2 years. You should consider maxing out an IRA every year and see if your IRA custodian allows you to trade as frequently as you wish. Think ETFs.

      Franky, I think getting the TSP board to change their mind to increase the number of IFTs is a lost cause.

    • Shaneeqa says:

      Not gonna happen.  Enjoy your retirement next year and don’t worry about the $$. Things will work out.

    • Davidb says:

       Please explain your TSP investing strategy, assuming you were allowed 3 trades per month. I’m interested in growing my amount.

    • Frannorton says:

      Man I want to know what you are doing.

  3. Gnatman says:

    Your contributions go in tax deferrred.  That’s all I needed to know.  If I deposit $10K and reduce my taxable income $10K, the ~ $2.5K tax savings is a great kicker on top of future growth.

    Or, to put it another way, putting away $10K minus the ~ $2.5K tax savings means it only costs $7.5K.

  4. Fed Peasant says:

    The book is probably worthy of a few bucks & the time spent to read it.

  5. Guest says:

    Its not free so you can bet your boots few CS will buy it

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