What Are the Average Earnings for a TSP Account With Mostly 'High Risk' Funds?

By on February 1, 2016 in Q&A with 18 Comments

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Q: I am new to the Federal government. My previous retirement contributions went into an account that earns an average of 8% over time. I have been contributing to it for about 20 years. My contributions are spread over 85% risk and 15% safe funds. It works well for me.

I have signed up for TSP and contribute 5%. Next year my income will increase and increasing my retirement contributions only makes sense. My TSP has the same contribution mix: 85% risk and 15% safe funds. No L funds.

Can you guestimate the average earnings for TSP? About what would be the average earnings of a TSP account with mostly high risk funds?

A: I would hesitate to predict returns of either the TSP or mutual funds.  I know how they have performed in the past, but not how they will perform in the future.

Having said that, if you set up a retirement account (e.g., IRA, etc.) outside of the TSP, three things are likely to be true.

  1. If the funds inside and outside of the TSP are similar, you can expect a somewhat greater return from the funds in the TSP due to the exceptionally low expenses.
  2. You have the opportunity for a greater diversity in investments outside of the TSP.
  3. You will have much more flexible withdrawal choices outside of the TSP.

The TSP has announced that they will be adding mutual funds to the TSP and will be liberalizing the withdrawal options in the future, so numbers 2 and 3 may change.  I’m sure that there will be articles on FedSmith when such changes occur.

John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. The book is written in an easy to understand question and answer format and covers all areas of federal benefits from the perspective of an employee at various stages of their career. Order your copy at shoplrp.com.

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

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About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.

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