How to Double Your TSP (Even If You Are Close to Retirement)
The Thrift Savings Plan (TSP) is a valuable retirement savings tool for federal employees and members of the military. Many participants aim to build a substantial nest egg for their golden years; however, the goal of doubling your TSP balance may seem daunting, especially if retirement is on the horizon. Fortunately, there are strategies you can implement to potentially achieve this goal, even if you’re close to retirement. Below are some actionable steps to help you maximize your TSP account.
1. Understand Your Investment Options
The TSP offers various investment funds, including:
- G Fund (Government Securities)
- F Fund (Fixed Income Index)
- C Fund (Common Stock Index)
- S Fund (Small Capitalization Stock Index)
- I Fund (International Stock Index)
Each fund has a unique risk-reward profile. If retirement is imminent, you might lean toward more conservative options, but consider the possibility of maintaining or increasing stock exposure for higher long-term growth potential. Depending on market conditions, even a small allocation to the C or S funds could yield significant returns.
2. Contribute the Maximum Allowable Amount
For 2023, the maximum TSP contribution limit is $22,500, with an additional catch-up contribution of $7,500 if you’re age 50 or older. If you haven’t reached these limits, it’s wise to ramp up your contributions, especially in your last few working years. Maxing out your contributions can take advantage of employer matching contributions, further fueling your retirement account growth.
3. Consider a Roth TSP Option
The Roth TSP allows you to contribute after-tax dollars, which grow tax-free and can be withdrawn tax-free in retirement under certain conditions. If you’re close to retirement but still have a decade or more before you access your funds, a Roth TSP might be an excellent vehicle for tax-free growth, enabling you to maximize your retirement income without the burden of future taxes on withdrawals.
4. Set a Target Allocation Strategy
Assess your current asset allocation and determine if it aligns with your risk tolerance and retirement timeline. A well-balanced portfolio usually includes a mix of stocks and bonds, but you may want to be more aggressive if your overall plan is to double your TSP. As you approach retirement, gradually shifting your allocation toward equities could increase your returns, given the potential for market growth.
5. Take Advantage of G Fund Safety
While the G Fund offers lower returns, it is virtually risk-free and guarantees principal. For individuals nearing retirement, this fund can act as a stabilization mechanism in your portfolio. While you want to capture growth, having a solid foundation in the G Fund can protect against market volatility during the transition to retirement.
6. Implement Dollar-Cost Averaging
Dollar-cost averaging entails consistently investing a fixed amount of money regardless of market conditions. This approach can reduce the impact of market volatility by purchasing more shares when prices are lower and fewer shares when prices are higher. This long-term strategy can be especially beneficial for participants who contribute regularly to their TSP.
7. Reassess Your Financial Goals and Needs
Schedule a financial review with a professional who understands retirement planning and the specifics of your TSP. They can help you refine your goals, adjust your strategy based on your risk tolerance, and ensure you’re on the right path. Life circumstances, such as health changes or financial obligations, can influence optimal strategies.
8. Stay Informed and Adjust Your Strategy
Keep yourself updated on TSP changes and financial markets. TSP policies can evolve, and economic conditions can change significantly. An informed participant can make necessary adjustments to their strategy and stay on track to meet their retirement goals.
Conclusion
While doubling your TSP balance close to retirement may sound ambitious, it’s important to recognize that with careful planning, strategic adjustments, and vigilant management, it can be accomplished. By maximizing contributions, understanding the fund options, reallocating assets wisely, and seeking professional advice, you can enhance your TSP’s growth potential and secure a brighter financial future as you enter retirement. Remember, the decisions you make today can significantly impact your lifestyle and financial security tomorrow.
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Maxed out every year for 30 years and my account has doubled every 5 years.
Just started working as a federal civilian employee how can i invest better with tsp investments.
I retired 2 years ago (22 Oct 22) at 55, I am still VERY aggressive with my funds. I review every 6 months but have only changed 1x since I retired. I will continue to stay aggressive likely for another 2 years or so then perhaps move most to the G fund…I maxed out every year and maxed out the CUC every year and after 17 years fed Gov…..I am golden, my account has absolutely kikd butt…I am fortunate to not need it now although I have full access with no penalty.
Roth is a luxury.
If can afford to put $10,000 in a trad TSP, you can only afford to put $7000 in a Roth. When you have $1,000,000 in a trad TSP, you only have $700,000 in the Roth. To me it's a wash, unless you have the luxury of maxing out the Roth in after tax $$. Pay me now or pay me later is the ques. The trad TSP is based on your tax burden being less in retirement, prob not the case any longer. The Roth benefit imho is the risk that taxes are going up in the future, to pay now and be unburdened later. In retirement you have zero deductions, tax burden will prob be higher. If your post retirement income is roughly the same, say 80% of pre retirement income, your taxes will prob be the same or higher.
Good video but where is the normal guy? Who’s this dude in a black suit? Hope blue suit guy is ok.
Ps CV
Max TSP, Max Roth, 10k I-bonds every year, 2 years out
Really enjoy your videos and advice. Does the 72 rule apply to return rates higher than 10 percent?
The biggest thing I have done for myself is cranked up contributions during high VIX periods. If you don’t know the volatility tool called the VIX think of it this way. When the market is down buy. If the market gets hit hard like 2019 and Covid. BUY BUY BUY with all you can. I don’t normally max but because of this strategy I am far ahead of my peers.
I'm the moron with all the money in the G fund for the last 33 years. I still have managed to save $648k. But I sleep at night.