The TSP Journey – Part 1

12.5.25: Audio automatically transcribed by Sonix

12.5.25: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1: Welcome back to the Federal retirement Show. I'm your host, Val Majewski with American Benefits Exchange. And as always, really appreciate you taking the time out of your busy schedule to join us to view our content. That's what it's here for. It's for you, the federal employee that's looking for accurate information when it comes to your benefits and retirement information. And we're getting close towards the end of the year. Hopefully everybody had a wonderful Thanksgiving. And we're going to finish 2025 with a three part series. And today's topic or today's title is called the TSP journey. And we're going to be going over part one today and the coming weeks. You'll see parts two and three as we close out 2025. But we want to take you on that journey. What is TSP look like when you start your career? What does TSP look like as you're moving through your career and into retirement? And what should TSB do for you when you finally do retire? So let's dive into today's content and talk about the TSB journey. So as I said, this is a three part series and these will be shortened videos. I just want to take you on this trip with me because I get a lot of questions, a lot of concerns, a lot of people asking, now what's the TSB or what should I do with my TSB, or how do I maximize my TSB, or how do I set myself up the best way possible with my TSB for retirement? And I've mentioned this before, planning for retirement is not like cramming the day before for a test.

Speaker1: You can't do it last minute, even though they give you some certain provisions like catch up contributions and things like that. Planning with your TSB is not something that you're going to do the last minute. It is a long game and we'll get into that a little bit today. So I want to take you on this journey of what it looks like when you start your career, no matter what age you start, or if you've never started with your TSB, maybe today is day one. And what will it look like as you get going through your working career? So the first part of TSP, the first journey or step that you take, this is going to be called the accumulation phase. Now people might call it different things, but for you this is when you're starting to build up the money in your TSP. You're starting to build that retirement nest egg. You're starting to take advantage of everything the government gives you. Now, what is it? If you go back to our previous content when we talk about TSP, TSP is the government's version of your 401 K. Okay. It's subject to 401 K rules, but it is one of your three retirement income sources. This is very important because when it comes down to figuring out the calculation for your pension and how much Social Security is going to contribute TSP ultimately, for a lot of federal employees, at least the ones that I talked to is going to carry the biggest amount of weight, the most weight when it comes to retirement income.

Speaker1: So why not maximize take advantage of everything the government gives you over the course of your career, so that when you are in the accumulation phase of TSB. You're maximizing efforts, you're optimized, you're setting yourself up for success. Now there's two different buckets that you can put money into. There's the traditional and the Roth bucket. These just depend on when you want to be taxed. Do you want to be taxed now or later? The traditional bucket is pre-tax dollars means you're going to be taxed on every dollar you put in, plus the interest you earn when you end up withdrawing the money down the road. The Roth bucket means you're getting taxed on the money today, and in the end, all the money you put in, plus the interest you earn, will come out tax free. When do you want to be taxed? Now or later. One of the biggest factors is the 5% match with your TSP. This is a big mistake that I see federal employees make is not maximizing that. We'll talk about that here in a little bit. Contribution limits for 2026. They increased. And now we did an episode on those limits being increased. But just to take advantage of it, the most that you can put in to your TSP in 2026 is $24,500 $500 per year. For those that are 50 and older, you have catch up contributions.

Speaker1: They increase those to $8,000 per year. And if you're in this sweet spot of age 60 to 63, you're in the super catch up contributions, and you can put in 11,250 on top of the normal contribution, the 24,005. So there are opportunities for you to put in not only just a 5% matching to get the most of free money that the government gives you. But you can go above and beyond if you want to hit these limits and try to maximize the contributions. Now, when it comes to growing your TSP over time, not only should you contribute and put money in and get take advantage of the free matching money that the government gives you, but there are different fund options that you can take advantage of that could increase your earning potential, right? These are ways in which you can get credited interest and see your account value grow in addition to your contributions. And these are the six different letters that hopefully everybody here is familiar with. And if you're not, I'll just give you a brief synopsis of these, but there's a gphc C and then L funds the traditional five, the Gphc S and I. Those are the traditional five funds. I'll get into the L funds in a second. G. G stands for Government securities. Or I can say it stands for guaranteed. This is the only fund that's guaranteed never to lose money, never had a losing month, a losing year in its history.

Speaker1: This is the only 100% conservative fund that you have within TSB, meaning you can't lose any money. The fund. F is a bond index fund. Generally speaking, it's a very conservative fund, but it has shown in the last couple of years that it can lose money. Um, when inflation is really high, bonds are low. That's why the fund lost over 12% a few years ago. Then we get into the stock funds and that's where it starts with the C fund. The C is made up of a large US companies. It's supposed to mimic the performance of the S&P 500. So if you see that on TV the S&P 500 is up or the S&P 500 is down. That means your C fund is most likely up or down, right? It's meant to mimic the performance of the S&P 500. The SS stands for small. So this is small to medium sized US companies that are not in the S&P 500. And that's what this index tracks. So the C and the S are US based companies small and large. When you combine the two of those and those are the stock funds when we're tracking US companies within your TSB I stands for international. This is made up of stocks of companies that are not in the US. Um, and these are international companies. So you've got the CS and the I, those are the three stock funds. You can check out the performance of those on TSP gov.

Speaker1: You can see how all of the the funds have done. And just based on your risk tolerance and what you think is going to work the best you can, choose your allocation strategy. The reason why I say that is because TSP is an administered account. It's not a managed account. You do not have somebody from TSP that should, you know, manage your account and give you investment advice, things like that. I will tell you if you get a phone call like that saying, hey, we're from TSP, we want to help you manage your money. Uh, hang up immediately because it's going to be a fraudulent call that does not happen. Tsp does not manage your money or give you investment advice. They simply administer your TSP account. Then there's the alphas. L stands for lifecycle. And I'm going over briefly all these right. If you want to dive deeper into it reach out to us. We can certainly assist. I'll mention the contact information here at the end of this this episode. But L stands for lifecycle. And there are numerous lifecycle funds. Uh, each lifecycle fund is made up of all the other funds. So no matter which lifecycle fund you have, you will have a portion in the G, the F, the C, the S and the I. How much you have of each of those depends on which fund you're in. The more, uh, closer you are to this year. We're in 2025. If you're in the L income, that's going to be the most conservative Elfland if you're in the L20 75, you're going to be in the most, uh, risk taking elfland.

Speaker1: Right. Most of the allocation is going to be in the CS and I. So just if you're in the Alphans understand this is not separate from the other funds. It's basically like a mutual fund, if you will, made up of all the other five funds and how much of each you have. You can go to TSP. Gov. You can see that what each fund is made up of and how that allocation is going to change over time. That's what the L funds do. So just understand, uh, the the ability for you to choose how you invest your TSP funds based on the, the funds that are available and what your overall risk tolerance is. So the benefits of your TSP, and this is what we were talking about earlier. How do you maximize your opportunity here. Number one start early. Start right away and set a goal and stick to it right. If you have a goal, I have a lot of people say I want to hit to $1 million. I want to get to $2 million. I million. I want to get to this. I want to get to that, or I want TSP to generate X amount of income for me in retirement. You've got to start early, remain consistent with your TSP, set that goal and stick to it. And if you overachieve, great. You can reset your goals as you go.

Speaker1: But start by staying consistent and staying with that. That goal in mind. Maximize the government matching. This is a big mistake I see federal employees make is not taking advantage of the free money the government wants to give you so they can. They'll match up to 5% of your salary. If you put in at least 5%, you're maximizing the government matching, which is the best kind of money that I know of, which is free money. I said stay consistent because this is a long term strategy. You know, the time value of money. There's so many different illustrations that you can find out there regarding the time value of money for people that start earlier, they end up having to not put in as much, because over time, that eighth wonder of the world compound interest kicks in. And now you've got this retirement nest egg that is built upon itself all over the years because you started super early, so take advantage of it. Start early, remain consistent and track your progress. If you set that goal at the beginning and you're not hitting it well, maybe you've got to put in more. Or if you're overachieving, great, maybe you reconsider that goal and increase it right. You go with a higher goal, you reprioritize. Or maybe now situations have changed. You lived in a different area when you started. Now you live in a spot where maybe the cost of living is is higher. Or maybe now you're married, you have family, kids, grandkids, whatever, and you need to have a higher goal to set.

Speaker1: This is the way that people can maximize, take advantage of, and do the best they can within their TSP. Yes, this is general guidance. It's not specific to your situation. So what I will say is that if you have specific questions about your TSP and setting it up properly for you or your family for your situation, reach out to us. Go to our website. It's Federal Retirement Show.com fill out the form one of our experts across the country, if it's not me personally, we'll be reaching out to schedule time to go over your personal situation. Answer all of your questions not just about TSB, but about your entire benefit situation. So that being said, this is part one of the TSB journey. Uh, be sure to look out for parts two and three, get notified when they come out. But if you like our content, go and view the previous episodes that we have. We have so many over 150 for you to to look into, to browse, to look at all that content. And if you like it, not only get notified about our new episodes, but share this with a friend, a colleague, somebody else that you think will really benefit greatly from viewing the federal retirement show. Well, again, my name is Val Majewski. You're on the TSB journey with me. This is part one. Be sure to check out parts two and three. Talk to you soon.

Speaker2: Or you trust someone with your money. It helps to know what to look for in a financial advisor, and knowing the difference can protect your wallet and portfolio. I'm Jim Tabaka for the Retirement Radio Network powered by Amara Life. If you're trying to get your financial life in order, maybe you're saving for retirement, planning for college funds, or just trying to make sense of investments. You might ask yourself, should I call in a professional to help? Enter the financial advisor CNBC senior personal finance correspondent Sharon Epperson.

Speaker3: Well, a lot of people just need a little extra help when figuring out what to do with their money when they've had a major life change and they want to have someone that has the experience.

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Speaker4: The advisor should be taking a deep dive into your financial situation, analyzing how much you're paying in fees right now, what kind of risk you're taking, making sure it's appropriate for you in your stage in life, making sure that you're just getting the most bang for your buck, and then analyzing where you are now and where you could go by working with them within.

Speaker2: The time frame of your consultation. Treat that first conversation like an interview. Take your time and speak with at least a couple of advisors before deciding. The first one you find, or the one with the nicest office may not be the best fit. So before you sign up for their services to find what you need, ask the tough questions and pick someone whose goals align with yours. Because when it comes to your money, it pays to ask for the retirement radio network powered by Amara Life. I'm Jim Tarabay.

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