Let a Thousand Investment Flowers Bloom

Just as April showers bring May flowers (except in Florida, where our showers don’t really begin until the summer), hopefully your retirement savings and investments are blossoming into a comfortable retirement income. April also happens to be Financial Literacy Month, and this week’s column is dedicated to finding ways to help you become more financially literate about planning for your retirement.

Most federal workers are now covered under the Federal Employees Retirement System, which means their retirement income derives from three sources: the FERS basic retirement benefit and Social Security—which together typically provide about 70% of a retiree’s income—and investments in the 401(k)-style Thrift Savings Plan. The only way to increase the value of your TSP account is by saving more of your income while you’re working and learning how to manage your retirement investments to maximize the potential of your savings.

As of November 2022, the TSP had a total account balance of $748 billion, with 6.7 million participants and an average balance of $112,000 per participant. Over the past decade, employees have clearly learned more about diversifying their investments.

In 2012, more than half of all TSP funds were invested in the very conservative government securities G Fund. Today the figure is 39%. More participants have diversified into the common stock C fund, which currently holds 37% of the total TSP balance. They’ve also put some of their savings in the newer S and I funds, which invest in smaller companies and international stocks, respectively. The S Fund holds 11% of all investments and the I fund a little more than 8%. 

Meanwhile, an increasing number of participants are letting the TSP do the investing for them, putting their money in the life cycle (L) funds, which adjust their investment mix to become less risky as the expected retirement date of the employee approaches. The L 2050 fund has more than 1.3 million participants and holds a total of $30.4 billion.

To boost your financial literacy this month, you can explore the following resources:

• TSP basics
• TSP forms and resources
• TSP YouTube videos 
• TSP online learning
• Financial Industry Regulatory Authority tools and resources
• Securities and Exchange Commission investor education
• Investor.gov

You can also take a deeper look at how your retirement picture is shaping up. If you haven’t checked your TSP account lately, take a peek and see what’s happening with your retirement savings. Maybe it’s time to increase your payroll deductions. The maximum you can save in your TSP in 2023 is $22,500. (Those who will turn 50 or older in 2023 can set aside an additional $7,500 in catch-up contributions.) These limits are in addition to the 5% agency automatic and matching contributions.

It might also be time to reallocate your TSP investments, based on your age and financial situation.

After considering all the information you gather about the state of your investments, you might even be ready to set a specific retirement goal, and start thinking seriously about life after government.