You’re doing the right thing, saving for your retirement. The Thrift Savings Plan (TSP) is a great tool to use for earning more money for your future. Because making money is what you want to do. But there are mistakes you can make that will reduce the money you have in the future. Today, I’m sharing the five common TSP mistakes I see people make to help you avoid losing money.
5 TSP Mistakes You’re Making
TSP Mistake 1 – Not Investing
You should be saving for retirement. Right now, you’re working to earn money for two people—you and your 80-year-old self. To cover room and board for both of them, you’ll need to save part of your current income to use years from now. So, it’s a mistake not to be using your TSP or another tax-advantage account to assist in amplifying the money you’re saving for future self. If you haven’t been contributing or set-up an account, now’s the time.
TSP Mistake 2 – Not Picking Your Investments
When you sign up for the TSP, they snail mail your account login information. Once you have the information, you may login and select the invests you want. If you don’t select your investment options, the TSP will automatically select them for you. All the money you allot from your paycheck will go one of two ways.
That is a TSP mistake because the investment options the TSP defaults to may not be the best for you. They may have more or less risk than you are comfortable with, or they may be in funds you don’t want. That’s why it’s important you educate yourself and make the selection. To help with those decisions, the website for the TSP has plenty of information on investment strategy and calculators.
TSP Mistake 3 – Not Increasing It
As your income increases, so should your retirement savings. Almost every year, the military receives an increase in their pay. This year, the National Defense Authorization Act for FY 2017, approved a 2.1% increase in military pay for 2017. It would be a TSP mistake not to go into MyPay and increase your TSP contribution by at least 1.1%. As your salary increases, you’ll want your quality of life to improve as well. The other half of your 2.1% pay increase can go towards improving your quality of life. One percent could be more money for entertainment each month or to help pay down any debt you have. But the most important part it to keep increasing your retirement savings as your income goes up.
TSP Mistake 4 – Forgetting About It
If you’re using the TSP, then you’re on the right track. That’s the biggest part of saving for retirement. But, the other part is reviewing and adjusting your investments every six months to a year. If you are not reviewing your account, it is a mistake. I coach many people who are getting ready to retire that have not earned any money on their contributions because it sat in the G Fund for 20 years. They set up the TSP but forgot about it after that. There needs to be reviews to adjust your invests and to check for errors to your account. Also, remember to confirm the person you selected to be the beneficiary of the account is still accurate. I’ve seen cases where a Servicemember was killed, and their TSP went to the ex-spouse instead of their current spouse. Your TSP isn’t something to set and forget.
TSP Mistake 5 – Withdrawing or Borrowing Money
I’ve already mentioned that right now you’re earning money for two people. So when you borrow or withdraw money from your retirement savings, it’s the same as taking money or a loan from your 80-year-old self. And since your TSP account is also the money you’re saving for your 80-year-old self, you won’t have that money in the future to live. And that is a huge mistake—you will need that money later. Of course, there may be times when it is necessary to borrow money from your retirement savings. For example, if you needed to pay for a catastrophic medical bill. But taking money out to go on vacation or to pay for your child to go to college isn’t a good idea. I’ve seen too many people who are ready for retirement but unable to do so because they kept spending their retirement savings.