What should, or shouldn’t, I do from a financial perspective during the financial upheaval that is associated with the COVID-19 pandemic. The markets are currently in bear territory. A bear market is when there is a loss of 20% or more in the market, and as of March 18, five of the TSP’s funds had fallen more than 20% since the first of the year and another was down almost 20%. The S Fund was down 38.78%; the I Fund was down 32.55%; the C Fund was down 26.11%; the L 2050 Fund was down 25.69%; the L 2040 Fund was down 22.79% and the L 2030 Fund was down 19.35%.

What follows are meant to be suggestions – not directions. They have been gleaned from varied sources.


1) Don’t Panic. This suggestion comes from lots of sources, including the TSP. On February 25th, the Federal Retirement Thrift Investment Board posted the following: “The stock and bond markets can change rapidly. By the time you react to the situation, the market may be moving in the opposite direction, and you could miss out on significant gains. Remember that investing for retirement is for the long-term. Try not to let short-term market movements steer you off course.”

Historically markets have recovered after losses, though the recovery periods have varied in length. Be wary or those who tell you “this time it’s different”; it hasn’t been different yet, so why should it now?

2) Where possible, do not take withdrawals from assets that are at a low point and might rebound later. Unfortunately, the Thrift Savings Plan will not let you choose the fund from which your withdrawals are taken. If your TSP investments are 50% in the G Fund and 50% in the C Fund, one-half of each withdrawal will come from the beaten down C Fund.

Retirees taking withdrawals from their TSPs should look and see if they have other sources (e.g., IRAs, taxable accounts, etc.) where they are allowed to choose the investment from which they take their distributions. When things settle down (this time it’s not different), you should consider whether it really makes sense to have all of your retirement savings in the TSP; after all, partial rollovers are allowed.

This is a financial emergency, so consider taking the money you would normally have taken from the TSP from your emergency fund. Even retirees should have emergency funds.

If you’re still working, consider stashing some of your future retirement savings in an outside IRA. Even after the implementation of the TSP Modernization Act, IRAs have much more flexibility in withdrawals.

3) Don’t give up on retirement savings (and on stocks) because of a temporary setback. Almost all financial advisors suggest that investors have a percentage of their retirement savings in stocks. That percentage usually varies based on how far an individual is from retirement.


4) If you have money in an outside traditional IRA, consider a Roth conversion now when stocks are beaten down. Move them to a Roth IRA and watch them grow tax free when stocks begin their recovery. Do, however, be aware that taxes must be paid on pre-tax money that is converted into a Roth IRA.

And remember, the current financial crisis will pass, just like other crises that have preceded it.

Historic Crash and G Fund Interest Rate Reduction

Busy Year Ahead for Thrift Board

Historic Times for the Market and TSP During COVID-19


TSP Investors Handbook, New 6th Edition