These five simple but important rules are the keys to success in maximizing the lifetime retirement income you’ll enjoy from your TSP account:

  1. Understand the Way it Works. As a participant, it is incumbent upon you to know, and clearly understand the TSP rules, procedures and options. Bookmark in your browser and spend whatever time you need there learning the ropes. Don’t forget to pay attention to the various publications available on the site through the Forms & Publications link at the top of every page.
  2. Maximize your contributions. Do this by saving for retirement to the TSP before you save anywhere else. Thinking about saving to an IRA or Roth IRA? Not until you’ve maxed out your TSP contributions. If you’re saving for something other than retirement, then it’s OK to save elsewhere. It doesn’t make sense to contribute to the TSP for a car purchase, a new home, wedding or college tuition, but when it comes to saving for retirement, the TSP should come first.
    If you have a Traditional IRA, or an inactive 401k, 403b or other employer sponsored retirement plan account, you should transfer its contents, as allowed, into the TSP, as allowed.
  3. Leave your money in the TSP as long as possible. Spend from your other accounts before you begin to invade your TSP account. Among the other benefits of the TSP, like ease of management, low cost, risk-efficient and well-diversified investment options, you’ll continue to enjoy access to the G Fund. The G Fund offers a value proposition not available anywhere else. It’s like “super cash”. While this might not seem very important when you are young, it will become more useful – and valuable – to you as you age.
  4. Select the right asset allocation model. Diversifying your holdings among stocks, bonds and cash is the primary way you’ll avoid unnecessary risk. If you’re not sure what to do, then your best bet is probably to pick the L Fund that most closely corresponds to your life expectancy. This isn’t the ideal approach, but it’s probably the best you’ll do without employing more advanced techniques.
  5. Rebalance regularly. Things change and you must make adjustments to accommodate these changes. Rebalance your account to the appropriate fund allocation at least once per year, and no more than 4 times per year. Don’t try to pick the best times to do it, just set a regular schedule and stick to it. Pay attention and you’ll catch problems early, manage your account toward your goals, and give yourself a better chance to succeed without the cost of big mistakes.

Written by Mike Miles
For the Federal Times
Publication February 2020