It may be scary to hear this, but it’s quite possible that messing up your Thrift Savings Plan (TSP) retirement assets is easier to do than you think.
When you understand how your TSP works and you can keep a cool head in these crazy markets, all while seeking the right advice, you can avoid TSP mistakes federal employees come to regret. We want you to be armed with the right information, so you are able to confidently make decisions and be the hero in your own retirement story.
That’s one of the fundamentals here at ProFeds. We want you to be armed and confident as you step into retirement knowing that you’re ready. We don’t want you to look back and wish you had done something differently. We want you to understand how your TSP works with no regrets and no mistakes.
The 7 TSP Mistakes to Avoid
#1: Getting started too late
You need to know that most people never feel quite ready to start planning, to start investing, or to have children. There’s all sorts of things that we never quite feel ready for, but we need to do them anyway. It’s important to challenge yourself to say, “money might be a little tighter, but I can do this. I can contribute more to the TSP.”
#2: Not contributing more or doing it sooner
Find a way to up your game. If you’re putting in 2% of your salary now into TSP, what would it take to get to 5%? What would it take to get to $10,000? What would it take to get to the max for your TSP? How do you get there? Finding a way to always level up your game and make things ultimately better for yourself. Remember, you’re not giving this money away to other people. You’re giving it to your future self.
#3: Missing out on an agency match
You must contribute at least 5% every single pay period to receive the 5% match. That is FREE MONEY! FREE! I cannot recommend enough that you meet that match. This would be a huge mistake not to. So please, do not leave any of that free money on the table.
#4: Being too aggressive or too conservative
Do your best to keep your emotions out and make sure that your choices are aligned with your gut. If you are afraid of losing money in the TSP, there’s a risk in being too conservative. But if you are going to have a heart attack because being in the C, S and I fund just makes you go crazy, then you need to make sure that your investments are aligned with your gut. Not to say that mathematics shouldn’t come into this equation, they absolutely should, but you’ve got to keep your emotions out and not allow them to drive the train.
#5: Trying to time the market
Slow and steady is going to win the race here. Long-term market gains is the way to make money in the stock market. That’s not to say there can’t be short wins or we aren’t able to have those big explosive gains, but that makes most people crazy. The idea of trying to time when to invest based on market conditions is very, very hard. Tons of studies are done all the time to show that those who try to beat the market have a very, very slim chance of doing so. In fact, they end up hurting themselves because they buy and sell at the wrong time.
#6: Not taking tax diversity seriously
One might ask, “Why would I put my money in a Roth and pay tax now, when I’ll be in a much lower tax bracket in retirement – can’t I just pay it then?” Well, that’s not really how this works. If we’re being honest with ourselves about the kind of income that you’re going to have in retirement, there has to be serious thought given to the Traditional and the Roth strategy. There’s good in both and having a combination of the two is what most people land on. Something to get your head wrapped around is tax diversification.
#7: Not seeking professional advice
You want to tip the odds in your favor. There are too many things that we do as laymen, who don’t operate in the financial planning world, to try to do this on our own. You have to get the expertise of these professionals that do this every day and make sure there’s not something really big you’re missing out on.
You might be focused on what funds you’re invested in and how aggressive you are, but they might notice there’s a tax train coming that you need to get prepared for. It’s another set of eyes on your strategy to make sure that you’re doing it well, and I encourage you to do it now. Get the advice so that you are on the right track and not in total damage control mode when the time comes in retirement to take the money.
If you’re ready to get serious about planning for your retirement from federal service, register to attend a workshop today!
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