Step 2 to Crush the TSP – Decide

Posted on August 30, 2019 Updated on September 8, 2019

The Thrift Savings Plan (TSP) is the military’s retirement account. Learning how to maximize its utility should be high on your financial priority list. I’m going to create a guide that will show you how to crush it with the TSP. We already showed you step 1 in that guide. Here’s step 2…

The 2nd Step to Crush the TSP – Decide

If you want to crush it with the TSP, you’ve got some decisions you have to make. You have to decide:

• How much you’re going to invest.
• What investments you’re going to use.

Decide How Much You Are Going to Invest

If you want to crush it, you need to invest as much as you can afford. How much can you contribute? Here is the TSP page that lists the contribution limits.

That page may be confusing, so here is the bottom line:

• You can contribute $19,000 in 2019.
• If you are 50 or older, you can contribute an additional $6,000.
• If you are deployed to a combat zone, you can contribute even more.
• Any matching contributions you get from the DoD due to the Blended Retirement System or BRS (if you’re in it) does not count toward these limits.

How much should you contribute? As much as you can. Period. Even a few hundred dollars is better than nothing.

Decide Which Investments You Are Going to Use

The TSP is pretty simple in this regard. You only really have six options.

The first option is to just let someone else handle this for you by using a Lifecycle fund. According to the TSP:

The L Funds, or “Lifecycle” funds, use professionally determined investment mixes that are tailored to meet investment objectives based on various time horizons. The objective is to strike an optimal balance between the expected risk and return associated with each fund.

Using L Funds is a simple, easy, and effective strategy that is completely fine for most people. If that is how you want to do it, you can just put all your TSP money in the L Fund with the year that is closest to when you want to retire and skip the rest of this blog post. For example, if you want to retire in 2034, you’d invest in the L 2030.

If you are more of a do-it-yourselfer, then you have five other investment options besides using a Lifecycle fund. The five investment options are listed in this table from the TSP website. Or you can read this booklet that discusses your investment options.

That is really it. You can either use a Lifecycle fund, or one of the five other funds listed in the table or booklet.

The Bottom Line – Decisions You Have to Make

Like we said at the beginning, you have to decide:

• How much you’re going to invest. (Hint: as much as you can afford.)
• What investments you’re going to use – Lifecycle vs do-it-yourself with the five other available funds.

If you decided against the Lifecycle funds, the next thing you have to do is determine your asset allocation, which is our next step to crushing it with the TSP.

Step 1 to Crush the TSP – Prepare

Posted on August 16, 2019 Updated on August 31, 2019

The Thrift Savings Plan (TSP) is the military’s retirement account. Learning how to maximize its utility should be high on your financial priority list. I’m going to create a guide that will show you how to crush the TSP. Here’s Step 1 in that guide…

Step 1 to Crush the TSP – Prepare

Before you can crush the TSP, you have to do a little preparation. You don’t need to be Warren Buffet, but you need to understand the basics of investing and the TSP. Luckily, there are many ways to learn the basics. Here are a few:

1. Read a book – Go to your library, search for a used book with AddAll (one of my favorite tools), or buy one new on Amazon. The easiest and quickest read to increase your basic investing knowledge is The Elements of Investing: Easy Lessons for Every Investor. Read this book. THAT’S AN ORDER! (unless you outrank me)
2. Read an online introduction to investing – The one that I’d recommend is the Bogleheads Wiki. Here’s a link to their getting started page and their investing start-up kit. What’s the best part? All of this is free.
3. Watch videos – The Bogleheads have a video series, which is also free.
4. Read blog posts – My favorite TSP-specific blog posts are found at The White Coat Investor. You can read What You Need To Know About The TSP, The G Fund – A Free Lunch, or The Military’s New Blended Retirement System. I wrote the last one.
5. Read the TSP website – The TSP website has a wealth of information.

Now you’ve got some homework. Once you’ve done as much of this as you can, move on to the 2nd step.