To do well in your TSP you have to be an expert, right?
You have to study the markets for hours everyday to know exactly when to buy and when to sell.
Fortunately, neither of those statements are true.
Anyone can do exceptionally well in their TSP just by understanding the basics.
Only 2 Important Things
The only 2 things that you need to know to do well in the TSP are:
Which funds are safer and which are more aggressive
When you need the money
Safe Vs. Aggressive
There are 5 core funds in the TSP: G, F, C, S, and I
The safer funds are the G and F funds and the more aggressive funds are the C, S, and I funds.
The safer funds aren’t as volatile in the short-term but won’t grow as much as the other funds overtime.
Here is a more in depth explanation of what the funds are if you want more details.
When You Need The Money
Generally speaking, any money you need soon from your TSP should be in the safer funds while money you don’t need for a while should be in the more aggressive funds.
For example, it makes sense for a 20 year old to invest almost entirely in aggressive funds because they probably don’t need their TSP money for 30+ years.
Conversely, if someone is retiring tomorrow then they are probably planning to withdraw/spend from their TSP soon so they will want more conservative investments to make sure that the money they need for that dream retirement vacation isn’t bouncing around in the market the week before they need the money.
As a rule of thumb, any money you need in the next 8ish years should be in conservative investments.
For example, if you are retiring tomorrow and are planning to withdraw 20k/year from your TSP then you would need about 160k (20k x 8 years) in conservative investments to get you through the first 8 years.
If you had a total of 400k in the TSP then 160k of it would be in conservative investments and the other 240k would be in more aggressive investments.
While Working
Most federal employees that still have 10+ years before retirement probably should have the majority of their money in things that are going to grow.
But as people get within 10 years of retirement the more important it becomes to introduce conservative investments.
As someone approaches retirement (and in retirement) it is important to set up the bucket system which this article shows you how to do.
L Funds and Mutual Fund Window
In my opinion it is better to invest in the core 5 funds and not the L Funds but you can learn why I think that here.
And it is really rare that I recommend the mutual fund window as the fees add up quickly.
