How Chasing TSP Fund Returns Will Ruin Your Retirement

The markets have been positive this year, and federal employees and TSP participants have begun pouring their money back into the C, S, and I funds in the TSP. Before you decide to change your TSP investments again, watch this video about how that could be a bad idea. As an advisor to federal employees, Thiago discusses how to avoid these mistakes.
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#TSP #federaladvisor #federalemployeesk

[@MrJohnskippy]

For the last three years, I’ve been 100% C & S. Never wavered.

[@TheFedCorner]

That's great! Just remember to reconsider this strategy once you are accessing the money. Too much volatility for sustainment once you start withdrawals!

[@swright5690]

It was hard. Wasn't it. I stayed too. We're still not back to where we were in Jan 22 though. I pop corks at S&P 500 at 5000.

[@okinawasurfspots3184]

I have decided to ride the C & S fund all the way to the crash site🤓. Been 45/45 in each since 2015, retired from Navy in 16 and started federal after that. looking back over past years, seems to show 3 yrs of good returns followed by a year of downside returns.

[@yeomanesque]

I dont worry about the market up and down. My money has always been in C and S, no matter how the market is doing.

[@TheFedCorner]

That's great! Glad to hear you're stoic about it. Just know that this can be dangerous once you're retirement and pulling from your portfolio, but if you're still working then volatility may offer you growth in the long-term. Good luck! -TG

[@joseCalderon1976]

I have a co worker that when he sees that he is losing money in his TSP, he moves everything to the G fund, then moves everything back when the market is high again. That's exactly what you are not supposed to do. I just stay where I'm at 🤦. A couple of months ago, I went from the L2040 fund straight into the C fund because I didn't like the 8% return of the L2040 fund after a few years

[@TheFedCorner]

It’s tough watching your investments drop in value. That’s why having a plan that aligns your investment strategy with your financial goals is so important. It helps you stay invested in the way that best supports your objectives even when it feels hard to do so.

[@davidfolts5893]

The present is weighted more firmly in our minds making recency bias a powerful force. Thanks for the excellent video. Please keep them coming!

[@TheFedCorner]

That's right! Recency bias takes out investors frequently!

[@davidfolts5893]

@@TheFedCorner Even Daniel Kahneman said he struggled with financial cognitive biases.

[@TheFedCorner]

@@davidfolts5893 I'd argue anyone with a pulse does to some degree too!

[@wdeemarwdeemar8739]

I am 100% C for all new but have some G and S from prior contributions. Anyway so far in 2023 is 8.91% up ytd. Good enough for me.

[@TheFedCorner]

Glad you're feeling confident!

[@MikeAnn193]

After hearing your advice I'm happy to say that I kept a large portion (about half) of my TSP _in_ the C and S funds even as I watched the total balance get lower and lower through 2022. It was sickening, but I figured the stock funds couldn't recover unless I did that (as you basically said). Worse, I was at a point in retirement where I started needing the money, so I had to take withdrawals too. But with each withdrawal (which comes out of all funds) I then transferred a portion _back_ into the stock funds, hoping to avoid locking in my losses. It was unnerving, but it seemed wise. Until I saw this video and your encouraging S&P news I hadn't checked the balance since late April, but I'm pleased to say it is indeed recovering. Thanks for the good news. If I even recover half of what I "lost," I might then reduce my heavy investment in stocks to a more moderate level for a retiree.

[@TheFedCorner]

Glad to hear we were helpful. Make sure you understand the risks if the markets flip again.

[@MikeAnn193]

@@TheFedCorner Yeah, that's why I said I plan to reduce my investment in stocks after I see some recovery. (I realize it may take a while, even years, and that it won't be all upward.)

[@Ben78255]

TSP is just the cherry on the cake 😊

[@TheFedCorner]

Glad to hear!

[@mattsidbury3414]

Joined USN September 2022 put it all in C fund Roth IRA, up 19% rn

[@TheFedCorner]

Yep! Like we always tell clients, the S&P volatility is opportunity in the long-term but risk in the short-term!

[@courtneygoodwin4766]

Hi. I think you have good messages however please consider that the music is rather distracting. Best wishes on your goals.

[@TheFedCorner]

Thank you for letting us know, so sorry to diminish the experience. Is the background music too loud and more in the foreground instead? Let us know and we'll get it adjusted for the future!

[@arthurburns993]

I have 30 years still, I’ll take the drops and buy cheaper not moving for a long time

[@TheFedCorner]

That's a great mindset to have!

[@Wraith983]

A lot of groups on social media using different strategies to plan fund moves. For TSPs

[@TheFedCorner]

Indeed, there are many websites out there offering investment strategies. Remember, none of them know anything about your circumstance!

[@leandrodavidmunoz1169]

100 💯 in C fund is the best. Just look at the past returns.

[@TheFedCorner]

Rock on, just be careful being this aggressive when you're retired or coming up to it. Sequence of returns risk is a retirement torpedo!

[@baguiokid2]

I need help, I'm invested in the S fund. For the past 10days DOW has been up, anticipating a gain on my S fund, I disappointedly had a loss! 13k. I have done well in the past but these past 10 days, when the market was good, I have lost money. Why? How?

[@TheFedCorner]

May depend on exactly when you got into the S fund. Intraday volatility will cause temporary reductions. Depending on how far you are from retirement, I wouldn’t worry about short term volatility. The stress makes people get out of the markets altogether and then they miss out on longer term growth.

[@alrocky]

"DOW" or Dow Jones Industrial Average is comprised of 30 stocks and behaves similarly to C Fund not S Fund.

[@forrestbradley-7qfab755]

I've been putting my funds in G for the past six months anticipating a market crash. So far I missed out on some decent gains for 2023. What are your thoughts about the current market?

[@TheFedCorner]

You're not alone. This is really tough to answer. We saw this in 2020 after the pandemic as well. The markets saw incredible returns in second half of 2020, and MANY federal employees missed out on that growth. You cannot time the markets, and attempting to do so is futile. My suggestion is to have an allocation that makes sense for your objectives. If you have a plan for what you want to accomplish, you can develop an investment strategy to give you the best chance of achieving that. Otherwise you're left to emotions to guide your investing, which is among the worst possible!

[@forrestbradley-7qfab755]

@@TheFedCorner I don't know if that makes sense though. Through reading and keeping up with market movement, the entire stock market is propped on 7 differen tickers. CPI measurements don't align with the experiences of the public and, even though a couple months have since passed, several very large banks have shut down (silicon valley and credit suisse among them). I don't think it's an emotional response to play defensively in an unpredictable and volatile marketplace. With that said, is there another strategy more defensive than G fund?

[@TheFedCorner]

@@forrestbradley-7qfab755 While that may be true, you can find correlations as to what sectors were driving new bull markets in virtually every year there was a bull market. That's the hard part! Is this time different? Were any other times different? That's why deciding whether to be in cash or in the markets based on what's happening in the economy is difficult. You can adjust your allocation accordingly -- for instance, changing your sector exposure, using different bonds, not being in tech in case it crashes, etc. But being out of the markets altogether means that one is trying to decipher when the markets will be "good" for reinvestment again, and THIS action, is futile. The only way to participate in the long-term capital appreciation that the markets offer, is to be invested in it--through ups and downs. If you miss only 10 of the better performing days in the year, you've missed most of the growth. The economy and the markets are not always correlated, as is displayed by this year (and proceeding 2008, check out economy vs markets details from then). Therefore, asset allocation should be based on a plan instead of trying to time getting in or out of the markets.

[@1Mannco]

@@TheFedCorner Hi, if you're retiring in 4 years and a bit aggressive, should you still be 100% in C until you retire?..I'm now in 80%C 20%G at almost 61 yrs old. Would it be wise if I gradually added G maybe yearly the next 4 yrs until retirement maybe at 50%C 50%G ??..thanks

[@TheFedCorner]

@@1Mannco Hello, it's difficult for us to say without it being too close to advice, but generally speaking, becoming more conservative as you get closer to retirement makes sense. This is what the TSP Lifecycle fund will do depending on the date selected.

[@not4you201]

50%S/50%C

[@not4you201]

Still have 24 years left before 62

[@TheFedCorner]

@@not4you201 Sounds like you've got plenty of time to grow your wealth. Wishing you great success!

[@Kep19901]

70%S/30%C 🙃

[@TheFedCorner]

Buckle in, my man!

[@Kep19901]

@The Fed Corner - Federal Retirement Planning haha!! I'm strapped in. I'll move to a more "traditional" allocation in about 10 years. I'm not worried I have decades to ride out the waves. Thanks for the videos and responses!