Thrift Savings Plan Retirement Catch Up

How To Catch Up Thrift Savings Plan Portfolio

Recently I had a subscriber ask the following question…

“I have been investing poorly (believe it or not) on my TSP fund. Due to too many reasons i neglected to pay attention to it as I should have (All my contributions were allocated to G fund). After I made the changes to what I intended it to be back in the end of 2009, I calculated that I am 5 years on the red (hypothetically speaking). I am 40 years old, and would like to make it up in the next few years. What is my best strategy? Should I change my contribution from 10% to the maximum? I have my TSP now allocated between the C – 35%, and S – 65%. I would like to make up for the 4 1/2 years i had lost, and still retire when I am 65.”

Instead of responding in the comments section, I really wanted to take the time to thoroughly respond to this individual’s situation. We recently answered a similar question from a subscriber based on their retirement situation.

My Take

Instead of offering financial “advice” on where to put your money and how to make up for your lost time, I’m going to give you some bad news then some good news.

Here’s the bad news, you simply cannot make up what you have lost. I know that is not what you want to hear but it’s the truth and that’s all you will ever hear from us. That money is gone and the best thing you could do for your emotional psyche and retirement portfolio is to look ahead and not behind. Don’t feel too bad because a lot of investors have this same mindset, they experience a loss then desperately want to make up for it. The common thread that comes to mind regarding this sentiment is, “If I can just get back to break even, then everything will be fine.” While that statement makes sense in theory it fails miserably in practice because of one solid principle….

….you cannot predict the market. I’ve talked about this numerous of times and will continue to do so, because once you understand this fundamental principle your investment decisions will be clear and concise.

The market has a nasty habit of doing what it wants when it wants, therefore it is literally impossible to accurately and consistently determine where the market is going. It is because of this concept that you must simply accept what the market gives you. Any attempts that an investor makes to force the market to conform to their “timeline” usually end up disasterous for the investor. Now this isn’t always true but sooner or later you will fall victim and the results are typically devastating.

Now that we understand we must always look ahead and never behind, it’s time for the good news. From this subscriber’s message they have 25 years left to invest in the Thrift Savings Plan. Unfortunately there is no iron clad way to predict future performance of the market, therefore the closest indicator/information we have is past market performance.

Based on the last 20 years of the stock market we can gather the following.

TSP Newsletter - November 2014
We had 3 bull markets and 2 bear markets:

  • 1995-2001 = 190% Gain
  • 2001-2003 = N/A
  • 2003-2008 = 41% Gain
  • 2008-2009 = N/A
  • 2009-Present = 153% Gain

I did not calculate the decline of the bear markets because it does nothing for this scenario. I simply wanted to know how much someone would have made investing in the bull markets. Technically speaking TSP subscribers would have made money during the bull market periods because the G Fund never loses money and accrues interest at a comparable rate to the U.S. Short Term Treasury note. Regardless, over a 20 year period, a portfolio value of $100,000 would be worth approximately $1,034,517 today. That’s if you used our conservative strategy and didn’t add another dime! I believe it goes without saying the more money you put into your Thrift Savings Plan the more you will get in return. At the very least I recommend that all federal employees contribute 5% of their salaries.

Unfortunately the Thrift Savings Plan does not offer historical data so we used the data directly from the S&P 500. Please remember that the C Fund’s goal is to mimic the S&P 500.


Regardless of the exact numbers you get the overall principle. What happened in the past is now over, you have done the right thing subscribing to our newsletter, now it’s time to recompose yourself and adjust fire.



1 Comment

  • MM

    Reply Reply November 7, 2014

    Thank you for your insight. I do agree with you that it is rather difficult to make up for the time lost, I do disagree with you on absolutely no strategy of recouping what has lost over time. The strategy I would suggest, and probably the only one that makes sense, is to maximize on TSP contribution. Second, open a Roth IRA and try to contribute the maximum $5,500 per year. Finally, invest as much as possible in stocks that pay dividends. Now, all this depends on how the market will perform over time, and as you had stated, timing the market is the worst thing one can do. However, if the goal is long term, then 25 years is long enough for a second chance.

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