Staying the Course with Your TSP

When it comes to your Thrift Savings Plan (TSP), patience is key.

When the TSP posts fund gains, we often see TSP participants begin chasing after those gains.

But trying to time the market and chase those gains could decimate your retirement savings if you’re not careful. There is no way to, consistently and regularly, to time the market and beat it. The market is too unpredictable.

I read a social media post recently where the author said, “I think the most expensive thing some of you own is your TSP password. Some of you would be a lot richer if you’d lost it for 20 years.”

While you may chuckle at that statement, there’s also a lot of truth to it.

Your TSP is a retirement account, which means it’s a long-term investment. So, don’t be impatient when it comes to your money—make long-term investments instead of short-term reactions. When it comes to your TSP and retirement, it’s often better to stay the course.

There are two questions to ask yourself when you are thinking about how risky you want to be when you’re investing:

How much you can emotionally handle to lose without being sick to your stomach, and
How much you can financially afford to lose without jeopardizing the long-term investment strategy that you have for your retirement money.
Providing an honest answer to these types of questions could help you build a TSP account and portfolio that you’ll stick with, even when market activity makes you nervous.

When determining your risk tolerance, it’s also important to understand your goals so you don’t make a costly mistake. Your time horizon, or when you plan to retire, can greatly influence your approach to risk.

Setting Realistic Expectations

Setting realistic expectations involves truly embracing the expression, “slow and steady wins the race.” Making incremental contributions to your TSP can make a big difference down the line. For example, if you make $100,000 per year and you contribute the maximum allowable amount (which for 2025 is $31,000), plus your 5% salary match (for FERS), you will amass an extra $36,000 in TSP for every extra year you decide to work. That can add up fast.

One of the most important things to remember for setting these expectations—especially with goals like saving for retirement—is that it’s a long-term strategy. It’s not a quick fix or a get-rich-quick scheme. Keep your eyes on the prize, stay the course, and avoid making rash decisions based on short-term market ups and downs.

By embracing the long game, you can harness the magic of compounding returns and better weather the storms of market volatility. Consistency in contributions to your TSP and sticking to a well-structured retirement plan are keys to bolstering your financial security for years to come.

Building Wealth is a Marathon, Not A Sprint

One thing I always want to express to federal employees about the TSP and investing—it’s a marathon not a sprint. You want to make sure that any funds that you select are based on your risk tolerance and looking at your overall larger financial picture.

Think of it this way: When you decide to save and invest for your long-term goals, like retirement, you’re essentially starting a marathon. Just as a runner doesn’t get discouraged by the occasional hill or fatigue along the way, you shouldn’t be surprised by market fluctuations. These fluctuations are like the hills in your investment marathon—they’re to be expected. In fact, they are part of what makes investing in your TSP a rewarding journey.

As a general rule, you may want to be more conservative as you approach retirement, so you don’t experience the larger peaks and valleys in your portfolio. It won’t earn as much as an aggressive strategy, but it will provide some much-needed security and peace of mind.

All that being said, these are just general principles and may not apply to everyone. You have to take a hard look at your personal finances and situation to make sure you are using a strategy that makes sense for you.

Building wealth is a lengthy process, and many things can change over time, especially when you consider market conditions. The question isn’t “if” the market will fluctuate. The question is “when.” It’s a fundamental aspect of the financial world that every TSP participant should come to terms with.

The current economy can give us all a much-needed reality check to make sure we are investing with our long-term goals in mind. It can also be a great reminder to simply “lose your TSP password” and stay the course for a while.