Attempting to time the market by frequently changing your TSP investments based on short-term market trends can be counterproductive. Image: Billion Photos/Shutterstock.com
By: Abraham GrungoldThere are approximately 6.9 million active TSP (Thrift Saving Plan) participants. They are active employees and retired employees who make up this TSP population. There are many types of participants who are anxious to see their account grow and hopefully one day they will reach their financial goal such as becoming a TSP millionaire.
TSP millionaires are not grown over night, and that’s the point.
This is an elite club of employees who have worked a 25–30-year federal career. And they consistently contributed to their TSP accounts, and they invested aggressively to reach this important milestone.
Then there are many others who want to preserve and protect what they have in their balance and want their TSP balance to last for their entire retirement and possible leave something to their heirs.
Unfortunately, many TSP participants do not realize the consequences of their actions. When it comes to your retirement you need to make wise decisions and these decisions should come with the help of a senior person in your office who has a successful TSP account or advice that comes from a professional who knows what it means to make safe decisions.
Below are the five mistakes to avoid for TSP participants. And these apply to everyone, whether you are an active employee or a retiree.
1. Not Contributing at Least 5% to the TSP: Failing to contribute at least 5% of your salary to the TSP means missing out on the maximum agency matching contributions. This is essentially turning down free money from your employer.
2. Listening to Facebook Groups for Financial Advice: Seeking financial advice from unofficial sources like Facebook groups can be risky and unreliable. It’s important to consult with certified financial professionals or reputable sources for investment guidance.
3. Changing Your Investments to Time the Market: Attempting to time the market by frequently changing your TSP investments based on short-term market trends can be counterproductive. This strategy often leads to missing out on long-term gains and increases the risk of losses.
4. Purchasing an Annuity with Your TSP Balance: Buying an annuity with your TSP balance can limit your flexibility and potentially reduce your retirement income compared to other investment options. Consider all available retirement income strategies and consult with a financial advisor before making such a decision.
5. Not Repaying Your TSP Loan: If you’ve taken a loan from your TSP account, failing to repay it can have serious consequences. Unpaid TSP loans can be declared as taxable distributions, potentially resulting in tax penalties and loss of retirement savings.
By avoiding these mistakes, TSP participants can better manage their retirement savings and increase the likelihood of achieving their financial goals. It’s advisable to prioritize consistent contributions, seek advice from credible sources, maintain a diversified investment strategy, carefully consider major financial decisions, and fulfill obligations such as loan repayments to optimize TSP benefits.
Abraham Grungold is a retired federal employee with 36 years of federal service – including with the USPS Inspector General, the VA Inspector General, the US Dept of Justice, and the US Dept of Labor. Through his company AG Financial Services he helps federal employees with their TSP and federal retirement planning and decisions. Mr. Grungold has written over 50 articles regarding the TSP and FERS retirement and been a guest on several podcasts with the Federal News Radio and Government Executive Magazine.
5 Steps to Protect Your Federal Job During the Shutdown
Over 30K TSP Accounts Have Crossed the Million Mark in 2025
The Best Ages for Federal Employees to Retire
Best States to Retire for Federal Retirees: 2025
Primer: Early out, buyout, reduction in force (RIF)
See also,
OPM Guidance Addresses Pay Issues arising During, After Shutdown
