Do you contribute to the thrift savings plan (TSP)? For government workers, the TSP is a powerful savings vehicle. You benefit not only from agency contributions but also from tax-deferred growth. That means you don’t pay taxes on growth as long as the money stays inside the plan. Tax-deferral may help your assets compound at a faster rate than they would in a taxable account.

When you make a contribution to the TSP, you have the ability to allocate the funds across a range of investment options. They include the:¹

• G Fund: Government Securities Investment Fund
• F Fund: Fixed Income Index Investment Fund
• C Fund: Common Stock Index Investment Fund
• S Fund: Small Cap Stock Index Investment Fund
• I Fund: International Stock Index Investment Fund
• Lifecycle Funds

The “alphabet funds” generally invest in the types of securities included in their respective name. For example, the G fund invests in government treasuries. The S Fund invests in small cap stocks.

The lifecycle funds invest in the other funds. However, the allocation of each lifecycle fund is automatically set to align with a future retirement date. For example, the L 2050 fund is for those who will retire in or near 2050, and invests more heavily in stocks because of the longer time horizon. The L 2020 fund is for those who are retiring in the near future, and it has a much more conservative allocation. Lifecycle funds are a convenient way to make sure you maintain an appropriate allocation at all times.

Through October 31, 2019, the TSP funds have the following year-to-date returns:²

• G Fund: 1.93%
• F Fund: 8.82%
• C Fund: 23.14%
• S Fund: 19.83%
• I Fund: 17.28%
• L Income: 6.06%
• L 2020: 7.55%
• L 2030: 13.47%
• L 2040: 15.72%
• L 2050: 17.61%

How will the TSP funds perform in 2020?

It’s impossible to predict future returns, especially in the short-term. However, there are steps you can take to minimize your exposure to risk and improve your odds for a successful outcome. Below are a couple steps you may want to take as you head into the new year:

Reassess your risk tolerance. What is your tolerance for risk and volatility? Do you know? If the answer is no, you’re not alone. Many investors haven’t really analyzed their feelings and comfort level with risk. As a result, they have an allocation that isn’t appropriate for their goals and needs.

A financial professional can use a variety of tools to determine your unique level of risk tolerance. They can then help you find the allocation that is likely to provide the best mix of risk and return for your needs.

Increase your contributions. In 2020, you can contribute up to $19,500 to the TSP. If you are age 50 and older, you can contribute an additional $6,500, for a total maximum contribution of $26,000.³

Of course, that limit doesn’t even include the agency automatic and matching contributions. If you contribute more than 5% of your income to the TSP, you get your contribution plus an additional 5% from your agency.⁴ Those contributions could help offset any investment downturns and keep your nest egg moving in the right direction.

Ready to get your retirement on track in 2020? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your needs and implement a strategy.

Have you finished your holiday shopping? It’s that time of year again. It’s the season to buy gifts for spouses, children, and all the other friends and family who play a meaningful role in your life.

This isn’t just the season for giving to others, though. You may also want to think about a gift for yourself. You could splurge on an expensive item you’ve had your eye on. Or you could give yourself a financial gift that will pay benefits long into the future.

This holiday season consider giving yourself the gift of a stronger financial future. Below are three retirement planning steps you can take to improve your finances today and in the future. If you aren’t currently implementing these steps, now may be the time to do so.

Increase your TSP contributions.

In 2020, you can contribute up to $19,500 to the thrift savings plan (TSP). If you are age 50 and older, you can contribute an additional $6,500, for a total maximum contribution of $26,000.¹

Of course, that limit doesn’t even include the agency automatic and matching contributions. If you contribute more than 5% of your income to the TSP, you get your contribution plus an additional 5% from your agency.² Those contributions could help offset any investment downturns and keep your nest egg moving in the right direction.

You may not be able to contribute the maximum amount of $19,500. However, any increase is helpful. You may want to gradually increase your contribution over time. For example, you could increase your contribution rate by 1% every few months. By doing it gradually, you may not feel a crunch in your budget.

Contribute to an IRA.

One of the biggest benefits to a career in government is the retirement plan. You can contribute to the TSP, earn annuity credits, and even participate in Social Security. You aren’t limited to those options, though. You can also contribute to an individual retirement account (IRA).

In 2020, you can contribute up to $6,000 to an IRA and an additional $1,000 if you are 50 or older.³ There are a few different types of IRAs but the most commonly used are the traditional and the Roth. With a traditional IRA you may be able to make tax-deductible contributions. Your contributions grow tax-deferred and then you can take taxable withdrawals in retirement.

In a Roth IRA, your contributions aren’t deductible. However, your withdrawals in retirement are tax-free. There are income limitations that restrict who can use a Roth. A financial professional can help you determine which type of IRA is right for you.

Contribute to an HSA.

In retirement, you’ll likely have the option of either enrolling in Medicare or staying in the Federal Employees Health Benefits (FEHB) system. Either way, you’ll likely have out-of-pocket health care costs above and beyond what is covered by insurance. In fact, Fidelity estimates the average retired couple will spend $285,000 out-of-pocket on health care in retirement.

You can start planning for those expenses today by contributing to a health savings account (HSA). With an HSA, you make a pre-tax contribution and allocate the funds according to your goals and risk tolerance. The money then grows on a tax-deferred basis. In the future, you can take tax-free withdrawals to pay for qualified health care expenses. It’s a tax-efficient way to pay for future medical costs.

Ready to take control of your retirement in 2020? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.