Managing Your TSP: Your Retirement Investment Choices

When it comes to retirement, “going with the flow” can have serious negative consequences for your investments. The author highlights some common pitfalls.

Over the past several months, we have covered three out of the four fundamental principles of investing. The three retirement investing principles we reviewed are:  determine your investor profileallocate appropriately, and reallocate tactically. Each builds on the one before it and is imperative to understanding how to manage finances. These precepts are meant to cut through the noise and misperceptions surrounding investing today. The final fundamental investment principle is: do not go with the flow.

Do NOT Go with the Flow

When it comes to retirement investing, following the crowd is really no plan at all. Moving your funds to a certain investment because you heard some friends at the coffee station talking about it is not an investment plan.

Just doing what everyone else is doing can have harsh consequences. At the very least, you could lose out on potentially higher returns. Doing with your finances what the guy next to you is doing is a poor financial strategy because you likely will not fully understand the consequences of your actions.

The choices you make now will affect your retirement. Whether that effect is negative or positive is largely up to you. 

How to Go Against the Flow

Be informed about your investment options

Be aware of the risk you are taking on with each purchase. Is this level of uncertainty appropriate with your own view toward risk, as well as your current financial situation?

A few practical ways to go against the flow are to simply follow the first three retirement investing rules. By knowing your investment profile, allocating appropriately, and reallocating tactically you are already taking steps that many others are not.

You also need to know the consequences of your investment

What are the tax implications? Are there particular regulations you need to follow and penalties you can incur if you don’t follow the rules correctly?

Losing money from ignorance is a common mistake, yet is so easily avoidable. There are many investment options available. Choosing the right one may seem like an impossible task, but it can be done. This may mean talking to a financial professional to create a strategy appropriate for your retirement goals.

Considering the whole retirement picture is vital in this process

A one-size-fits-all approach doesn’t work in investing because each person has so many variables at play. An investment strategy for a woman who is single and in her fifties with no mortgage and no credit card debt will be different from the investment strategy of a couple in their thirties who want to get their three children through high school and college. 

A Retirement Tip for Federal Employees

Part of retirement investing is planning for the transition periods. An important transition period in federal employees’ lives is while waiting for final adjudication of retirement paperwork.

Typically, final adjudication takes six to nine months to complete, and during this period you may expect to receive an estimated 75% of your pension, although this amount can vary.

One thing you can do to plan for this transition period is to utilize your unused annual leave check. You will receive a lump sum at retirement for the balance of your unused annual leave, which typically arrives four to six weeks after separation. These funds may help you cover the gap between your former salary and the reduced pension amount. 

Now that we’ve covered the four fundamental investment principles, you can begin to cut through the confusion and confidently plan your retirement.

Disclosure: The information contained in these blogs should not be used in any actual transaction without the advice and guidance of a tax or financial professional who is familiar with all the relevant facts. The information contained here is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for the individuals’ specific circumstances or needs and may require consideration of other matters. RBI is not a broker-dealer, investment advisory firm, insurance company, or agency and does not provide investment or insurance-related advice or recommendations. Brandon Christy, President of RBI, is also president of Christy Capital Management, Inc. (CCM), a registered investment advisor.

About the Author

Brandon Christy, CPA, PFS, is the founder and president of Retirement Benefits Institute, Inc. He is an established leader in contracted federal retirement benefits education, and his company has trained over 10,000 federal employees to help them gain clarity and confidence in retirement.