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U = Uniformed Services

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Make it easier on yourself.
If you're not sure how to distribute your money among the individual TSP funds or you just don't have the time or desire to figure it out, let the Lifecycle (L) Funds do it for you. You can choose the L Fund closest to your expected retirement date and it will automatically make allocation adjustments as time goes by. Visit L Funds for more information.

If you are within a few years of retiring from Federal service, you can still reap the benefits of contributing to your TSP account. Also, it's important to keep adding to your account for as long as you can. You will likely spend two, perhaps even three decades in retirement and you'll want your money to continue to grow.

Catching Up with Contributions


If you got a late start on retirement savings, or if you haven't accumulated as much as you would like, the IRS gives you a chance to make up for some lost time with catch-up contributions. Be sure to take advantage of them if you can:

  • You must be age 50 or older in the year in which you plan to make catch-up contributions.
  • You must expect to contribute the maximum amount allowed of regular employee contributions for the year to the TSP or other eligible tax-deferred employer plan.

Visit Contribution Limits for current information on the IRS allowable limits.

Your TSP Asset Allocation


The way in which you distribute your money among the TSP funds should reflect your time horizon and your risk tolerance. The closer you are to retirement, the shorter your time horizon. As a result, your primary focus might shift from growth and accumulation to safety and preservation. Even if your risk tolerance is very high, you may not have time to recover from severe drops in the market if a large portion of your account is allocated to stock funds. If you determine that you have not saved enough, this is not the time to take on more risk than you have the ability to sustain — the better alternative would be to increase your savings.

If you are heavily invested in the stock funds, now is the time to consider shifting to a more conservative allocation, especially if you do not have other retirement funds safely invested elsewhere.

However, you will likely spend many years in retirement and, as a result, you could risk outliving your money. Be aware of this as you determine whether some portion of your account should be invested in the TSP stock funds to take advantage of their long-term growth potential.

As you approach retirement, if you find that you have a considerable shortfall in your retirement savings, you'll want to consider increasing your contributions (subject to IRS limits) rather than attempting to compensate by increasing the risk in your portfolio.

Visit Investment Funds to learn about all of the TSP funds, their features, and past performance. The information there should help you to determine an asset allocation that best suits your needs at this stage of your career.

If you are a FERS employee, don't miss out on free money from your agency. You should consider contributing no less than 5% of your salary to the TSP. If you do, you will receive the maximum Agency Matching Contributions. To learn more, visit Agency Matching Contributions.

Your Tax Treatment Options


You have the option of making traditional (pre-tax) contributions and/or Roth (after-tax) contributions to your TSP account. For more information on these options, visit Tax Treatment of Your Contributions.

Think carefully about your options. Your decision should center primarily on what your tax rate is now and what you expect it to be when you start withdrawing your money.

An Ongoing Process


As you near retirement, it's important to remember that retirement planning is an ongoing process. On a regular basis, you should:

  • Review your investment experience and your TSP balance.
  • Reassess your retirement income needs and your investment goals.
  • Consider your risk tolerance and make any necessary changes to your asset allocation.
  • If necessary, increase your TSP contributions.