The Top 5 Considerations For Proactive TSP Management

Calculating Thrift Savings Plan (TSP)

For federal employees, the Thrift Savings Plan (TSP) is an invaluable piece of the retirement puzzle. After all, the “agency matching” that your employer provides essentially means you’re getting free money on top of what you are already contributing on your own. 

On the surface, managing your TSP so that you’re maximizing your benefits seems like an effortless task—after all, there are only a few types of funds that are in the Thrift Savings Plan. However, once you start adding in other factors, things can get a little more complicated. 

For example, how does it affect your TSP if you leave your job and are no longer employed with the federal government?

How does it affect your plan if you have a Roth IRA? 

What happens to your Thrift Savings Plan if you pass away? 

With all of these questions, proactively managing your TSP account is pretty important. Let’s uncomplicate it by taking a close look at the various circumstances that affect a TSP and discussing how you can proactively manage your Thrift Savings Plan (TSP) account.

#1: Make Sure You’re Reviewing Regularly.

Proactive management of the TSP requires a regular review of the financial accounts, funds, and the overall economy, so you’ll want to make sure you’re on top of those things. 

Start by looking at your contributions themselves. TSP participants can contribute up to $19,500 each year on their own, and that number is even higher ($26,000) if you’re 50 years of age or older. Even if you don’t contribute the maximum amount, though, you want to be sure you’re giving at least enough so your agency matches your contributions. 

For TSP participants who aren’t members of the uniformed services, you receive a 1% match on the first 3% of your basic pay that you contribute each pay period, and 0.5% for each of the next 2% you put in, up to 5%. This means that you can effectively double your money as long as you pay in your 5%! 

You’ll also want to regularly review your funds and the economy.

#2: Understand the Thrift Savings Plan Funds.

Although your Thrift Savings Plan is an investment portfolio, it operates differently from any other investment account. Rather than giving you the choice of individual stocks to put your money into, the Thrift Savings Plan has fifteen different funds: five basic and ten lifestyle. These are the G, F, C, S, I, and L options.  

So, while you don’t technically get to pick the individual stocks you want to fund, you do get to select the percentage of your money that you want to go toward each TSP fund type. 

The six TSP funds you have to choose from are as follows: 


The G-fund (Government Securities Investment Fund) invests in non-marketable Treasury securities and is the only one that guarantees a return on principal. Compared to the other funds, this one is the lowest risk but also the lowest reward. 


The F-fund (Fixed Income Index Investment Fund) represents the next step up on the risk-reward ladder. With this fund, you invest in a wide range of securities and bonds, and the monthly interest paid out is usually more than that of the G-fund. However, you have no guarantee that your principal will be returned. 


The Common Stock Index Fund, or C-fund, invests in the companies that comprise the S&P 500 Index. This fund has extraordinary volatility and has historically posted large returns. 


The Small-Cap Stock Index Investment Fund (S-fund) invests in companies that are part of the Wilshire 5000 index. However, since this index comprises smaller companies that are much less established, there is a greater risk than the C-fund. Keep in mind, though, that the S-fund has posted historically higher returns than the C-fund. 


The International Stock Index Investment Fund invests in established companies in 22 developed countries to bring you the greatest mix of investments. While this is the fund with the most significant risk, it also represents the opportunity for the greatest reward. 


The Lifecycle Funds consist of ten separate funds and represent a sort of autopilot account where your TSP contributions are invested for you so that you are able to manage it as little as possible. 

#3: Develop a Strategy.

Now that you understand what the various TSP funds are for, you should take the time to develop a strategy that will maximize your returns for your federal retirement.

Perhaps one of the best strategies for those who aren’t familiar with investing or don’t want to bother with the TSP is to put your contributions into the L-fund that corresponds with your retirement and let it diversify your portfolio for you. 

However, if you want something more customized, you’ll have to look at your retirement requirements and determine how much risk you’d like to incur. 

Additionally, we recommend developing a strategy of observation and inter-fund transfers to maximize earnings while reducing losses. This will help you to earn more while reducing the chances of a major loss. 

The G-fund Bailout

If you’re extremely stressed about your TSP investments or the market is taking a major dive, you can always reallocate your funding over to the G-fund, which is also known as a ‘Safe Harbor,’ guarantees a return on your investment. However, we don’t recommend doing this unless you believe you’re going to lose money or the market is crashing. 

Stop-Loss Risk Allowance

The market ebbs and flows—that’s just a fact. Sometimes, you’ll have to allow losses to achieve a larger return. There are times when you’ll have to cut your losses and call it quits, though. 

We recommend reallocating your money to a more stable or ascending fund if you’ve noticed that there’s been a steady decline in your money over several months OR you know of a market condition that is or will be negatively affecting one of the funds you’re invested in. 

#4: Understand Your Options and Requirements.

Like any benefits present by the Federal Employee Retirement System (FERS), your TSP account has specific guidelines you must follow. 

Firstly, your withdrawal requirements state that you must be at least age 59 ½ or retired to request a withdrawal. Additionally, you are limited to one withdrawal per thirty days. Additionally, this withdrawal must be greater than $1,000. Alternatively, you can request monthly payouts at any point, but they must be greater than $25 monthly.

However, due to what could be extra heavy withholding of withdrawals, you may want to avoid withdrawing until the IRS requires it—that is, the year you turn 72. 

Additionally, there will also be specific tax requirements that you’re obligated to uphold, as your TSP is considered a form of taxable income. With regular TSP contributions, your account is tax-deferred, meaning you don’t pay taxes until you withdraw. 

When signing up for your Thrift plan, though, you also have the option to choose a Roth TSP, which takes your taxes out upfront and results in tax-free distributions later. However, your TSP does not allow a ROTH conversion of your traditional TSP account.

#5: Know Your Beneficiary Options.

As with most federal programs, there are beneficiary options for the Thrift Retirement Savings and Investment Plan. However, to receive the funds after your death, your beneficiary must fill out Form TSP-17 and submit it with a copy of the death certificate. 

However, not just anyone can be your beneficiary. As per the TSP website, your surviving spouse is the only one who can retain the account and continue to allocate funds throughout it. Any other beneficiary (previously determined or otherwise) may only receive a lump sum or transfer to an Inherited IRA account, with strict liquidation requirements.

If you have a specific beneficiary in mind, you can file them using Form TSP-3. If you choose not to do so, determining who receives the payouts will be done using a specific order, as listed in the TSP Death Benefits Guide

It’s also important to note that paying out to a beneficiary is a taxable event, so consider carefully who should receive that tax burden. If the intended recipients are children, you may also consider continuing the tax deferral by depositing the funds into an annuity with a structured income payout so that the payments are given to them slowly over time. 


Proactively managing your TSP can be challenging, especially if you aren’t aware of the various rules and regulations that you’re responsible for following. Thanks to this article, though, you should now be able to not only understand your TSP but also be able to formulate a plan for maximizing its potential. 

If you’re still unclear on managing it or where to go from here, don’t worry. The Federal Benefit Advisory has qualified retirement planners that are ready to help you make the right decisions. 

We’re here to help you retire comfortably and securely, so don’t hesitate to contact us today

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