TSP Cheat Sheet and Funds

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Investing for retirement is truly simpler than it sounds. It’s also more rewarding than most of us could imagine. See below for FAQs related to common issues when trying to invest in or understand the TSP. For any that aren’t answered below, email your question to moneygouge@gmail.com. We’ll respond to you individually and then include the problem and solution below (anonymously) for others to reference.

How do I Access my Account?

Utilizing your TSP requires you to log into two separate accounts. It’s easier to do both if you have a smart card reader*.

  1. To modify how much you contribute to your TSP, log on to MyPay. TSP is the option on the bottom left hand side of the screen. Once you’re on the page that shows a bunch of percentages, click on the icon that looks like a pen on the bottom right and you can modify how much of several different types of pay go towards either Roth or Traditional.
  2. To modify where your contributions are going, log on to TSP.gov. This allows you to select where each and every dime of your contributions is allocated, shift your funds around if desired, and generally control everything related to your TSP besides how much you’re putting into it.  

*(This is the one we’ve been using for a while. Wouldn’t recommend using it on a government computer, but it’s worked flawlessly on both Mac and PC for accessing personal accounts on our own time).

When can I Withdraw?

Short Answer: If it all possible, don’t withdraw until you can do it tax free and penalty free. If you’re not working for the government anymore, you can do it at 55. If you’re still working for the government, then you have to wait until you’re 59.5.

Long Answer: Technically speaking, you can withdraw from your TSP whenever you’d like. The money in your account is yours. That said, if you do it according to any timeline besides that listed above, you’re likely going to have to pay taxes and fees on it. If you’re in a personal financial crisis and you absolutely need the money, then so be it. We all have unexpected crises and sometimes it requires funds beyond what it is our emergency fund and short to mid-term investment accounts. Before you withdraw from your TSP early though, read here for what it will cost you. The long and short is that if you withdraw early, you sacrifice many of the benefits that the TSP is designed to provide you, and you can end up paying fees as if it were a traditional brokerage account… and then some.

How does Matching Work?

Short Answer: Dedicate at least 5% of your pay to your TSP to take full advantage of Agency/Service Matching.

Long Answer: The government automatically contributes 1% of your basic pay to your TSP, even if you contribute nothing. For every dollar you contribute up to 3% of your pay, it’s matched penny for penny. For every dollar you contribute over  3% and up to 5%, it’s matched 50%. See table below for specifics and why the short answer is the better one.

Your ContributionGovernment ContributionTotal Contribution
0%1%1%
1%2%3%
2%3%5%
3%4%7%
4%4.5%8.5%
5%5%10%
6%5%11%
7%5%12%

What’s the Maximum I can Contribute?

The most that YOU can contribute is $1625/month. However, this doesn’t include what the government matches for you… See the table above for why government matching is such a great thing.

Should I choose Roth or Traditional?

This is a popular topic when talking about retirement accounts. In a nutshell, the Roth option involves paying taxes on your income before contributing to the TSP, but none when you pull your money out during retirement. Traditional will reduce how much you pay in taxes now, but you will have to pay an enormous amount in taxes down the road. For the vast majority of military personnel, Roth is the way to go. 

Funds

The TSP offers two different types of funds: Individual and LifeCycle. The individual funds allow you to invest in any of three stock market indexes, a fixed income index, and/or a fund that’s simply aimed at not losing money. The lifecycle funds are a combination of the individual funds. They’re automatically adjusted for you as you get older, which is why they’re called ‘LifeCycle Funds’.

Individual Funds

G Fund

The G Fund is the safest fund. It is the only one that guarantees both the principal and the interest. It aims at outpacing inflation while guaranteeing you don’t lose what you initially put in. This interest rate is calculated each month by a weighted average of the previous month’s yield for roughly 150 bonds. Click here for a deeper explanation, but the takeaway is that the G Fund will guarantee that you don’t lose money and try to outpace inflation. 

G Fund Stats:

10 year average annual return: 2.04%

Lifetime average annual return: 4.82%

Total Expense Ratio: 0.049%

F Fund

The F Fund, also known as the Fixed Income Fund, attempts to mirror the Bloomberg Barclays US Aggregate Bond Index. This gives you more potential returns than the G fund, as the F Fund fluctuates according to the US Bond Market. Generally speaking, it is viewed as more risky than the G fund, but less risky than the C, S, or I funds. The F Fund will almost certainly offer you better returns than the G Fund over the course of time, but it comes with no guarantee that the value of your holdings won’t decrease from time to time. More Details.

F Fund Stats:

10 year average annual return: 4.07%

Lifetime average annual return: 6.18%

Total Expense Ratio: 0.06%

C Fund

The C Fund is designed to match the composition and performance of the S&P 500. The S&P 500 is composed of the 500 largest companies listed on the New York Stock Exchange*. As a result, it fluctuates a lot more than the G or F Funds do. For the same reasons, it also grows a lot more over time. If you want to take advantage of the long term growth of the stock market as well as dollar cost averaging, this is a great one to have in the core of your portfolio. 

*More precisely, it’s an index of the 500 companies with some of the highest market caps, including multiple classes of stock for some of those companies. The result is an index of 505 equities, weighted using the free-float method

C Fund Stats:

10 year average annual return: 13.90%

Lifetime average annual return: 10.88%

Total Expense Ratio: 0.051%

S Fund

While the C Fund represents the vast majority of the US Stock Market, the S Fund represents small ($300M to $2B Market Cap) and mid-size ($2B to $10B Market Cap) companies that aren’t included in the C Fund. It aims to match the performance of the Dow Jones US Completion Total Stock Market Index. The upside of the S Fund is that since the companies that make it up are smaller, they typically have more potential to grow. However, the companies that make up the S Fund are viewed as slightly riskier since they’re not quite as large as those in the C Fund. If you want to balance your TSP to represent the US Stock Market as a whole, using the S Fund to supplement the C Fund is a great way to do it. More Details.

S Fund Stats:

10 year average annual return: 13.32%

Lifetime average annual return: 10.34%

Total Expense Ratio: 0.068%

I Fund

While the S and C Funds represent the US Stock Market, the I Fund gives you exposure to the international stock market. It’s designed to track the MSCI EAFE Index, which is an index made up 874 constituents entirely outside of the US and Canada. About 70% of the constituents come from Japan, the UK, France, Switzerland, or Germany, and the other roughly 30% are from any one of about 15 other developed countries. The potential benefits of investing in the I Fund are that it further diversifies your TSP and could potentially allow you to tap into growing companies in developed markets. However, it tends to be more volatile than the C and S Fund, and even more difficult to understand. More Details.

I Fund Stats:

10 year average annual return: 5.87%

Lifetime average annual return: 5.16%

Total Expense Ratio: 0.055%

L Funds

L Funds, or LifeCycle Funds, are a combination of the 5 individual funds, automatically adjusted over time. Each one is associated with a ‘target date’ for when you plan to begin withdrawing from your TSP. As you get closer and closer to your target date, the allocation of the funds is adjusted quarterly to gradually decrease risk and solidify gains over time. See the images below (all from TSP.gov) to see how the allocation shifts over time. One of the huge benefits to these funds is that it involves absolutely no work on the part of the service member except for picking the target date closest to when he or she plans to begin withdrawals.

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