If you’re a federal employee or part of the uniformed services, you probably have a Thrift Savings Plan (TSP)—the government’s version of a 401(k). It’s a great tool for retirement savings with low fees and tax advantages, but you might be wondering: Do I really want all my retirement money managed by the federal government? The answer depends on your goals, comfort level with risk, and how much flexibility you want with your investments.
How Have TSP Funds Done Recently?
TSP performance can be a bit of a rollercoaster, and February 2025 was no exception. According to GovExec, here’s how the funds performed:
- G Fund (Government Securities): +0.35% (slow and steady!)
- F Fund (Fixed Income): -1.18% (a little rough this month)
- C Fund (S&P 500 Stocks): +5.34% (big gains!)
- S Fund (Small Cap Stocks): +3.32% (not bad!)
- I Fund (International Stocks): +1.38% (some positive movement)
- L Funds (Lifecycle Funds): Mixed results, depending on how they’re allocated.
These ups and downs are a good reminder of why diversification is key. If most of your money is in bonds (like the F Fund), you might have seen some losses, while those in stock-heavy funds (C or S) had a good month. Which brings us to an important question: Should you keep all your retirement savings in TSP?
What If You Don’t Want Everything Sitting with the Federal Government?
TSP is great, but it does have some limitations. Here are a few things to think about:
1. Limited Investment Choices
TSP keeps things simple with just five core funds and some lifecycle funds. If you want access to things like individual stocks, real estate funds, or a wider variety of mutual funds, you might want to roll over some of your TSP money into an IRA.
2. Less Flexibility in Withdrawals
TSP has strict withdrawal rules, which might not fit your retirement plans. If you want more control over how and when you take money out, an IRA or brokerage account might be a better option.
3. Required Minimum Distributions (RMDs)
Like all tax-advantaged retirement accounts, TSP is subject to RMDs starting at age 73. However, some retirees prefer rolling their funds into a Roth IRA (if eligible) to avoid RMDs altogether.
4. Concerns About Government Control
Some investors are wary of keeping their entire nest egg in a government-managed account. While TSP is secure, having diversified holdings across different financial institutions can provide peace of mind.
What Are Your Options?
If you’re thinking about moving some of your TSP money, here are a few options:
- Keep Some in TSP, Move Some Elsewhere: You can roll part of your balance into an IRA while leaving the rest in TSP.
- Full Rollover to an IRA or 401(k): If you leave federal service, you can move your TSP into an account with more investment options.
- Stick with TSP: If you like the simplicity and low fees, there’s nothing wrong with staying put!
Final Thoughts
TSP is a solid option for retirement savings, but it doesn’t have to be your only option. Exploring a rollover could give you more investment choices, flexibility, and control.
Not sure what’s best for you? We’re here to answer your questions and help make sure your investments align with your goals. CLICK HERE to make an appointment.