The Top 5 TSP Mistakes That Federal Employees Commit. Sponsored By: Todd Carmack

Some of you might develop your perception of buying annuities, joining the TSP, and signing up for other retirement plans by mere reading of too many generalized articles, which are not for the federal employees but for the general people. Therefore, it is repeated that they often miss the golden chance and fall in the category of losers, as they could not take the proper benefit of their retirement plans. 

So, considering the problem, we are here with the five top mistakes that federal employees commit with the Thrift Savings Plan (TSP). Moreover, after reading this post, you will be able to decide what will be better for you to choose from. 

Let us have a look over these mistakes.

 

#1. Some employees do not have the TSP

This is one of the biggest problems that people come across in their financial career. Being part of the Thrift Savings Plan is inevitable for a federal employee if he/she wants to lead a prosperous life after his/her retirement. But, some federal employees don’t adopt the Thrift Savings Plan, and this is one of the biggest mistakes that they commit. 

So, they might go with the TSP by keeping the following things in their minds:

• How much money do you want to have in your TSP at the time of your retirement?
• What should be the amount of risk that will keep you comfortable?
• What will be the value of your annual premium if you want to reach your early decided goal?

So, you need to be very careful while drafting your TSP solutions because, in most situations, you might find it hard to make the right decision, and the single solution would not be applied to your problem. 

 

#2. Contributing less than 5% in the TSP

This is the stereotype that is found in the minds of most of the federal employees, that contributing more to their TSP brings harm to their interest. This might be the thinking developed from reading a generalized article that was written for something else. This isn’t the case with federal employees. 

Even if they do not contribute 5% to the TSP, they are unable to enjoy a considerable benefit based on their contribution. Because of the contribution they make, the company matches that in your TSP on your behalf. Therefore, if you contribute 5% in your TSP, you will have a 5% rise in your annual income, as this contribution is based on the total income you earn in one year.

So, being a federal employee, you must not keep this fear in your mind, and you must play out of the box, to enjoy the full potential benefits that have been kept in the TSP. 

 

#3. Carelessness for their adopted lifecycle funds

The lifecycle funds comprise the full five plans that are under the TSP. Once you adopt these funds, they start moving towards a more complex and tough decision as you move closer to your retirement. But, these complicated and hard decisions might inflict enormous benefits for your cause. 

But, the need is to make the right decision at the right time, which most people do not pay heed to and lose the critical occasions that could be enjoyed with a good return. Most of the time, people are confined to drafting a specific solution that does fit their requirements, and they start thinking about their lifecycle funds. 

Therefore, in such a situation where you find it hard to draft a suitable solution for your lifecycle funds, you must consult with a financial adviser who could read your case and give you a good piece of advice keeping your position in view. 

 

#4. Investing 100% of their money into the G fund

The G fund is one of five index funds, and most people give priority to this fund because it possesses the lowest volatility. This fund is invested only in the USA government securities that are issued on the TSP only. This fund allows you to have an interest in your investment without losing the principle. 

G funds depend upon the federal fund rates and federal reserves, so it stays the best option to have low interest for years without any concern of losing the principal amount you have invested in the fund. But, this is not that beneficial for the federal employees, as they cannot earn big through this fund. 

With the growth rate of only 2.3%, you might feel safe, but to get a big gain out of your TSP, you have to pay for the more significant risk for the bigger gain. So, this is again one of the biggest mistakes that federal employees commit and stay away from exploring the real worth of the advantages offered by the other funds. 

It would be an excellent approach to invest in different funds, like the C fund or S fund, but investing all the money in a single fund might halt the way of your financial career’s betterment. 

#5. Investing based on past performance

Most of the federal employees consider that checking the trend of the past performance of the funds will be the best prerequisite of choosing the right fund. But, this is not the right way of selecting the right fund. 

The most important thing that you come across in choosing the funds comes up in the form of your own circumstances that you are facing. So, always select a fund keeping in view your requirements and needs without paying heed to the past trends of the funds, as they may alter their course any time. 

Having gone through this post, you might have understood the mistakes that most of the federal employees commit in their financial career and could not enjoy the real benefits offered by these funds. Here is some advice: if you want to earn big from these plans, you must get yourself out of the box of safe play. 

So, mark your requirements and consult with a good financial adviser to make the decision to invest in funds.