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

February 1, 2016 5:23 AM , Updated August 13, 2016 5:49 PM
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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.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at [email protected] to discuss schedules and costs.

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About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.