3 Steps to Picking a TSP Investment Strategy

These three steps can help federal employees develop a basic investment plan for the TSP.

Investing in the TSP gets way overcomplicated! With just a few searches online you’ll see that everyone and their dog has a different opinion on what you should do with your money. 

But the Thrift Savings Plan (TSP) does not have to be complex. It can be as easy as 1, 2, and 3. 

Disclaimer: This article is simply one way to think about investing. It certainly won’t make sense for 100% of people but I hope it helps.

Step 1: The Basics

The first step is to understand the very basics of the TSP funds. All you need to know to get started is which funds are aggressive and which funds are conservative. 

  • The More Conservative Funds: G Fund and F Fund
  • The More Aggressive Funds: C Fund, S Fund, and I Fund

It’s important to fully understand each of these funds, and this is why I don’t include the L Funds.

Step 2: When Do You Need the Money?

The next step is to get an idea of when you plan on using your TSP money.

Some people plan on using it at the beginning of retirement and for others, they are hoping to not use their Thrift until later in retirement. Some people even plan to leave their entire TSP to their spouse/kids/charity. And if you don’t know exactly what your plans are, that’s okay; an educated guess is just fine. 

Step 3: Put Away 8 Years

Now that you understand the basics of the TSP funds and have a rough idea of when you plan on using your TSP we now need to invest it. For most people, a great investment strategy can be summarized with this: 

If you need the money soon (within 8 years) it should be in conservative investments. If you don’t need it for a while (8+ years) it should be in something that will grow over time (more aggressive investments). 

For example, if you are retiring tomorrow and plan on spending $20k per year from your TSP, then you’d need $160k in conservative investments to cover your first 8 years of retirement. Any TSP money you have above the $160k should be in something that will grow over time. 

Having your next 8 years locked in conservative investments will help ensure any money you need soon is safe and secure while your more aggressive money will help beat inflation and get the growth you need overtime.

But what if you aren’t retiring soon? 

If you are 30 years old and planning on retiring in 30 years, then you probably don’t need many (if any) conservative investments because you simply don’t need your TSP any time soon. 

Anything Else?

This article/strategy is intended to be really simple to make it understandable and actionable for a lot of people. Your TSP strategy does not have to be complicated to provide incredible results. 

About the Author

Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.