Market volatility has been making headlines lately and creating anxiety among some of the Feds who have noticed sharp swings in their Thrift Savings Plan (TSP) balances. While this uncertainty may tempt you to pull back your investments, smart investing usually isn’t about dodging dips.
At Serving Those Who Serve, we’re strong believers that the right TSP moves are based on your time horizon, risk tolerance, and cash needs—not the latest headlines.
When investing for retirement, the goal isn’t to perfectly time the market. Instead, you may benefit from keeping your long-term compounding intact while using your TSP’s built-in tools to help control risk and behavior. Here are some ways to leverage TSP strategies during volatility.
Your TSP Levers in a Choppy Market
Many people search for the best TSP funds in a downturn, but there’s no one-size-fits-all answer. Understanding how each fund works may help you make small adjustments to help offset volatility.
- G Fund: Principal and interest are guaranteed by the U.S. government. Adds stability to portfolios, but also comes with potential trade-offs. https://stwserve.com/is-the-g-fund-really-safe/
- F, S, C, and I funds provide diversification, helping to balance growth potential with risk management.
- L Funds are auto-rebalanced and automatically adjust the allocation, gradually lowering your exposure to more volatile stock funds as you approach retirement.
Staying the Course vs. Making Smart Tweaks
It’s common to feel a bit nervous when market volatility hits your retirement account. However, this is typically not the time for knee-jerk reactions. Abandoning a sound strategy too early is almost always a mistake. Panic selling creates the risk of locking in losses and missing the recovery.
If you have a longer retirement timeline, staying the course might make sense. However, this doesn’t always mean doing nothing. Depending on your goals, time horizon, and risk tolerance, you may consider buying dips or slightly increasing your allocation to F or G funds.
In most cases, moves should be measured and remain in alignment with your overall plan. When markets get rocky, it’s common for investors to react out of fear and become overly conservative. If you’re unsure about your current allocation, consider consulting with a professional who can help you make the proper adjustments.
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Rebalancing and Transfer Rules
There are three ways to adjust your TSP:
- Contribution allocation: Directs allocations for new money deposited, does not affect your existing balance.
- Reallocation: Changes the allocations of the account’s existing balance.
- Interfund transfers: Moves money between funds within your existing allocation.
You’re limited to two balance-moving transfers per month, with additional moves allowed into the G Fund. Plan your moves carefully so you’re not locked out of changes when you actually need them.
L Funds do not require manual adjustments. Instead, they automatically rebalance daily to the predetermined allocation. This may be an effective way to remain disciplined when emotions run high.
An STWS Checklist for Volatile Weeks
Market uncertainty can make it tempting to act quickly, but consistency is often one of the best TSP strategies during volatility. Follow these tips to stay focused, avoid common mistakes, and manage risk without overreacting:
- Review your target allocation: Make sure it aligns with your long-term goals, or choose an L Fund that aligns with your expected retirement date.
- Schedule rebalancing: Quarterly is typically sufficient(or select L Funds, which rebalance daily).
- Respect transfer limits: If making adjustments, batch your changes and avoid tinkering with your allocation.
- Keep making contributions: Dollar-cost averaging may benefit you in a down market.
- Avoid acting out of fear: Revisit risk only if your goals have changed, not because the market wobbled.
Stay Disciplined Despite Volatility
Market volatility can feel scary, especially if you’re nearing retirement. But there’s no need to panic. Your TSP gives you tools to help you ride out volatility without derailing your plan.
If you want help pressure-testing your current portfolio or exploring model options, the team at Serving Those Who Serve is here to help. Reach out at [email protected] to schedule a consultation.
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
