You Don’t Need to Be a Financial Genius to Choose TSP Funds—But You Do Need a Plan

Key Takeaways

• You don’t need to understand market cycles or economic forecasts to build a successful TSP strategy, but you do need to align your fund choices with your retirement goals and time horizon.

• The biggest mistake TSP participants make is leaving their investments on autopilot without revisiting allocations before and during retirement.

It’s Not About Picking Winners. It’s About Picking What Works for You

You don’t need to be a financial genius to make smart decisions with your Thrift Savings Plan (TSP). But you do need clarity, intention, and a plan that evolves with your stage of life. As a public sector employee or retiree, your TSP is a critical pillar of your retirement income. Yet far too many people overlook how simple shifts in fund choices and timing can dramatically impact outcomes.

In 2025, the TSP continues to offer the same five core funds: G, F, C, S, and I, along with Lifecycle (L) Funds. These options seem straightforward on paper, but the real question is: how do you turn them into a strategy that works for your goals?

Understanding the TSP Fund Basics Is Still Step One

The TSP doesn’t require active trading. In fact, the less tinkering you do without reason, the better. But you should understand what each fund is designed to do:

• G Fund: Government securities. No risk of loss, but lowest returns. Ideal for capital preservation.

• F Fund: Bonds. More risk than the G Fund, with higher return potential but sensitive to interest rate changes.

• C Fund: Tracks the S&P 500. Large U.S. companies. Long-term growth with volatility.

• S Fund: Small- and mid-sized U.S. companies. Higher volatility, higher long-term growth potential.

• I Fund: International stocks. Exposure to developed foreign markets. Includes currency and political risk.

• L Funds: Diversified, age-based funds that shift automatically from growth to preservation as you near your retirement target.

This is the menu. But you still have to decide how to build your meal.

Start with Your Retirement Timeline

To choose the right funds, you need to know when you plan to start withdrawing. If you’re:

• More than 15 years from retirement: You have time to ride out volatility. Growth funds like C, S, and I should take center stage.

• 10 to 15 years away: It’s time to begin reducing risk gradually.

• Within 5 years of retirement: Your focus should start shifting toward preservation and income stability.

• Already retired: Your allocation should reflect how much income you’re drawing and how long your savings need to last.

Don’t assume your current fund mix is appropriate just because it hasn’t lost money recently. In retirement, the wrong allocation can drain your savings faster than expected.

Why L Funds Aren’t Always a One-Size-Fits-All Solution

The Lifecycle Funds are convenient, especially for those who want a “set it and forget it” approach. But they are not tailored to your unique needs. In 2025, the L Funds adjust based on a broad set of assumptions that may not apply to you.

For example:

• If you plan to work part-time after retirement and don’t need full income right away, an L Fund may shift to conservative assets too soon.

• If you have a pension or other income sources, you might be able to stay invested more aggressively, even during retirement.

Evaluate whether the L Fund matches your risk tolerance, expected retirement income needs, and life expectancy.

Risk Isn’t a Bad Thing—But Misunderstood Risk Can Be

Too many TSP participants equate risk with loss. In reality, risk is the price you pay for the potential of growth. The key is to take the right amount of risk based on your age, goals, and how soon you’ll need to draw income.

For instance:

• The G Fund has no market risk, but it also barely outpaces inflation.

• The C Fund, despite its short-term swings, historically offers higher long-term returns.

Ignoring risk entirely may feel safe, but it often leads to underperformance that can leave you short of your goals. Instead, focus on managing risk rather than avoiding it.

Rebalancing Isn’t Optional

As markets move, your fund allocations will drift from your original plan. A portfolio that was 60% stocks and 40% bonds five years ago might now be 70/30, depending on market performance. That drift introduces risk you didn’t intend.

The TSP lets you rebalance by submitting an interfund transfer. Aim to review and rebalance at least once a year, or after major market shifts. This realigns your account with your intended strategy.

Don’t Forget to Adjust for Required Minimum Distributions (RMDs)

If you’re turning 73 in 2025, you’re subject to Required Minimum Distributions. These mandatory withdrawals from your TSP account can impact your tax bracket, investment allocation, and income plan.

Planning for RMDs means:

• Ensuring enough liquidity in the G or F Funds to meet your withdrawals without selling stock funds in a down market

• Reviewing the projected tax impact of each withdrawal

• Adjusting your overall allocation to ensure it still supports long-term growth, even as withdrawals begin

You can’t avoid RMDs, but you can control how prepared you are for them.

Coordination with Other Retirement Income Sources

Your TSP doesn’t exist in a vacuum. If you’re also receiving a FERS annuity, Social Security, or military retirement pay, your income picture may allow more flexibility in how you use your TSP funds.

For example:

• If your fixed income sources cover most basic expenses, you can afford to leave your TSP invested longer.

• If you expect to delay Social Security to increase your benefit, your TSP might need to act as a bridge income source.

This is why fund selection can’t be made in isolation. You must think about your broader financial picture.

Don’t Rely on Short-Term Market News to Guide Long-Term Strategy

It’s tempting to shift your allocations based on headlines, but doing so rarely works out in your favor. The TSP is a long-term retirement plan, not a brokerage account for market timing.

Instead of reacting to:

• Inflation reports

• Interest rate changes

• International instability

Focus on:

• How much time you have left until you need the money

• How much volatility you can tolerate without panicking

• How much income you’ll need once withdrawals begin

In 2025, as markets continue to react to global and domestic changes, sticking to a plan is more important than ever.

When to Seek Outside Help

You don’t need a financial degree to manage your TSP, but if you:

• Feel unsure about how to allocate based on your timeline

• Are within 5 years of retirement and haven’t rebalanced

• Are already retired but unsure how much to withdraw or when

… then it’s time to talk to a professional. A licensed agent listed on this website can help you:

• Align your fund choices with your income strategy

• Reduce tax exposure from TSP withdrawals

• Coordinate your TSP with other retirement benefits

The right help could save you thousands—or keep you from running out of funds too early.

How TSP Fund Strategy Evolves in Retirement

Your TSP’s role changes dramatically once you retire. While the accumulation phase focused on growth, the decumulation phase requires:

• Stability

• Liquidity

• Predictability

That doesn’t mean going 100% into the G Fund. Instead, consider segmenting your TSP:

• Short-term (0–3 years): G Fund or F Fund to fund immediate withdrawals

• Mid-term (3–7 years): L Income or balanced mix of C/F/G depending on risk tolerance

• Long-term (7+ years): C, S, I Funds to provide continued growth for your later years

By structuring your funds this way, you help ensure you’re not forced to sell during market dips—and your money keeps working for you.

Make TSP a Part of Your Retirement Reality, Not Just a Savings Tool

Too often, retirees see the TSP as the savings vehicle of their working years, not as a managed income source in retirement. But this mindset risks:

• Overspending early

• Leaving money in risky funds too long

• Underutilizing options like partial withdrawals or RMD planning

In 2025, the TSP offers more flexibility than it used to. You can:

• Make multiple partial withdrawals

• Change fund allocations at any time

• Stay invested while drawing income

But flexibility only helps if you have a plan.

Your Fund Choices Matter More Than You Think

Even small shifts in allocation—say, moving from a 70/30 mix to a 50/50 one as you near retirement—can significantly alter how long your funds last. And once you’re retired, recovering from missteps becomes harder.

Take time to:

• Understand your funds

• Match them to your retirement timeline

• Revisit and adjust your strategy annually

TSP success isn’t about being perfect. It’s about being prepared.

Your Retirement Plan Deserves Attention, Not Assumptions

You don’t need a finance degree to succeed with the TSP. But you do need a willingness to take your future seriously. Fund choices, timelines, and income needs may change—but with the right plan, your retirement doesn’t have to suffer.

Talk to a licensed professional listed on this website who can walk you through your options. They can help ensure you’re not just picking funds—you’re building a future.