TSP Advice Is Everywhere—But This Is What Government-Focused Financial Planners Are Actually Recommending Right Now

Key Takeaways

• Government-focused financial planners are placing increased emphasis on Roth TSP strategies, life-stage withdrawals, and inflation-adjusted income models in 2025.

• The updated TSP landscape, including new catch-up limits and fund performance, requires a revised approach if you’re within 5 years of retirement.

Why Standard TSP Advice Isn’t Always Tailored for You

If you’ve spent decades in public service, you’ve likely followed conventional wisdom about your Thrift Savings Plan (TSP): contribute early, diversify your allocations, and let compound interest work its magic. While that advice worked well during your career, financial planners who specialize in government retirements are urging clients in 2025 to rethink some of these assumptions.

Generic advice often overlooks the nuances of:

• FERS annuity timing and supplement expiration

• Federal tax treatment differences in TSP withdrawals

• Survivor benefit elections and spousal planning

• Coordination with Social Security and Medicare eligibility

You’re not just any investor. Your retirement is structured by rules, options, and timelines that don’t apply to the private sector. Let’s break down what trusted planners are actually recommending in 2025.

1. Prioritize Roth TSP Conversions Before Age 63

The Roth TSP is no longer just for early-career contributors. In 2025, many government-focused planners recommend shifting more of your contributions—or rolling over portions of your traditional TSP—to Roth, especially before you turn 63.

Why this matters:

• At age 63, your Modified Adjusted Gross Income (MAGI) will begin affecting your Medicare Part B and D premiums two years later, in 2027.

• Strategic Roth conversions now can lower your future required minimum distributions (RMDs), reducing taxable income later.

• You lock in tax-free withdrawals for future use without IRMAA surcharges increasing your healthcare costs.

This is particularly useful if you plan to retire between ages 57 and 62, when your income is temporarily lower.

2. Reevaluate Your Fund Allocation by Lifecycle Phase

In 2025, the TSP Lifecycle Funds remain popular, but financial planners are advising a more customized approach once you reach your retirement window (within 5 years before or after retirement).

Adjustments worth considering:

• Move away from default L Funds if you’re planning a phased withdrawal or bridge strategy.

• Shift more assets into the G Fund to stabilize income during early retirement years.

• Gradually increase F Fund holdings if you want fixed income exposure without equity risk.

Your TSP allocation should reflect your withdrawal timeline, not just your age.

3. Create a Multi-Phase Withdrawal Strategy

A single withdrawal strategy doesn’t work across a 25- to 30-year retirement. Planners are now recommending a phase-based withdrawal structure for TSP accounts:

Phase 1: Early Retirement (Ages 57–62)

• Use the FERS annuity and the Special Retirement Supplement.

• Draw limited amounts from TSP or taxable brokerage accounts.

• Delay Social Security to grow your benefit.

Phase 2: Medicare Eligibility and RMD Planning (Ages 63–73)

• Limit traditional TSP withdrawals to avoid higher Medicare premiums.

• Use Roth TSP and other tax-free assets for supplemental income.

Phase 3: Post-RMD Period (Age 73+)

• Start RMDs from Traditional TSP.

• Reassess withdrawal rate to avoid longevity risk.

This structure supports both tax efficiency and income stability.

4. Take Advantage of 2025 Catch-Up Contributions

For 2025, TSP participants aged 50 and older can contribute up to $31,000, and those aged 60–63 can contribute even more—up to $34,750—thanks to the Secure Act 2.0 super catch-up provision.

Government-focused planners are recommending you:

• Max out these contributions in the final 5–7 working years.

• Use Roth catch-up contributions if you expect a lower tax burden now versus retirement.

• Avoid overfunding TSP if you lack tax diversification elsewhere (like a Roth IRA).

Even a few high-contribution years can significantly shift your retirement math.

5. Don’t Rely Solely on RMDs for Income Planning

Some retirees assume RMDs will guide their withdrawal amounts. However, RMDs are a tax requirement—not a financial strategy. Advisors recommend you design your income plan based on need, not obligation.

Here’s what they suggest:

• Start TSP withdrawals intentionally before RMD age (now 73) to manage tax brackets.

• Coordinate TSP withdrawals with Social Security timing for optimal results.

• Use TSP projections to estimate income replacement ratios year by year.

Your income plan should reflect your actual spending needs, not IRS rules.

6. Watch for Inflation Impacts on the G Fund

Many federal retirees lean heavily on the G Fund, especially for short-term security. While it remains the only fund backed by the U.S. Treasury and protected from loss of principal, its returns can be vulnerable to long-term inflation erosion.

In 2025:

• Inflation has moderated from its 2022 peak, but long-term risks remain.

• The G Fund’s yield has improved but may lag rising living costs over decades.

Financial planners often suggest:

• Pairing the G Fund with equities (C or S Fund) to hedge inflation risk.

• Keeping at least 2–3 years of income in the G Fund but using diversified exposure beyond that.

• Reviewing annually how your real purchasing power is holding up.

7. Plan for Spousal and Survivor Benefits Using TSP Coordination

Your TSP decisions don’t exist in a vacuum. Planners working with federal couples urge proactive coordination:

• Ensure you’ve named primary and contingent beneficiaries on your TSP.

• Consider spousal IRAs or Roth conversions to keep income levels balanced.

• Factor in how TSP will supplement survivor annuity elections if one spouse passes.

Failing to coordinate these aspects can reduce your survivor’s income by thousands annually.

8. Prepare for Long-Term Care Gaps Without Overdrawing TSP

The risk of needing long-term care is increasing as longevity rises. Many retirees mistakenly think their TSP can cover these costs alone.

In 2025, financial planners are:

• Encouraging use of Health Savings Accounts (HSAs) if still eligible.

• Recommending designated reserves outside of TSP for major medical events.

• Warning against depleting TSP early to pay for care, which can lead to later-life income shortfalls.

A separate plan for long-term care helps preserve your TSP for everyday retirement needs.

9. Review Your Withdrawal Election Form Every Few Years

Your TSP withdrawal election isn’t set in stone. You can change it annually, and government-focused advisors are reminding clients to take advantage of that flexibility.

In 2025, consider:

• Adjusting your monthly payments if inflation or expenses rise.

• Switching between fixed dollar and percentage withdrawals if market conditions change.

• Reviewing tax withholding settings to avoid surprises.

Annual reviews allow you to optimize income as life evolves.

10. Leverage Professional Advice That Understands Government Retirement

Finally, planners stress that generic financial advisors often lack the knowledge to make the most of TSP, FERS, and Social Security integration.

You should seek out professionals who:

• Understand the FERS annuity calculation, including high-3 average and years of service.

• Can navigate PSHB, FEHB, and Medicare coordination.

• Know the withdrawal sequencing that works best with federal benefits.

2025 brings new contribution limits, inflation variables, and policy changes. Personalized advice is more important than ever.

Retirement Planning in 2025 Demands a More Nuanced Approach

You’ve worked in a system with its own rules, and now your retirement should be built around them. Whether you’re just entering your retirement window or are already managing withdrawals, applying strategies tailored for government employees can make a difference.

If you’re uncertain about whether your current plan aligns with these 2025 realities, consider speaking with a licensed professional listed on this website. A short conversation could help you avoid costly missteps.