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Many federal employees had their Thrift Savings Plan (TSP) experience big declines last year. In 2023, start using these strategies to help protect your investment portfolio in the future.

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If Your TSP Fell Last Year, Do THIS

The Thrift Savings Plan (TSP) is a retirement savings and investment plan for federal employees and members of the uniformed services. It is similar to a 401(k) plan and offers various investment options to help participants grow their retirement savings.

Like any investment, the TSP is subject to market fluctuations, and there may be times when the plan experiences a decline in value. If your TSP fell last year, it’s important to take proactive steps to address the situation and potentially turn things around.

First and foremost, it’s crucial to avoid making knee-jerk reactions to a temporary descent in the TSP. Market downturns are a natural part of investing, and selling off your investments during a downturn can lock in losses and hinder your ability to participate in potential future gains.

Instead, consider the following actions if your TSP suffered a decline:

1. Review your investment strategy: Take a close look at your current TSP investment allocation and assess whether it aligns with your long-term financial goals and risk tolerance. Consider consulting with a financial advisor to ensure your investment strategy is appropriate for your individual circumstances.

2. Stay the course: Unless there have been significant changes in your financial situation or long-term goals, consider staying the course with your TSP investments. Markets have historically rebounded from downturns, and selling low can often lead to missed opportunities for future growth.

3. Rebalance your portfolio: If market volatility has shifted the balance of your TSP investments, consider rebalancing your portfolio to realign with your target asset allocation. Rebalancing can help manage risk and optimize long-term returns.

4. Consider increasing contributions: Market downturns can present an opportunity to buy investments at lower prices. If you have the capacity to do so, consider increasing your TSP contributions to take advantage of the potential for future growth when market conditions improve.

5. Educate yourself: Take the time to educate yourself on market cycles, investment principles, and the factors that can affect TSP performance. Understanding these concepts can help you make more informed decisions and navigate market fluctuations with confidence.

It’s important to remember that market downturns are an inherent part of investing, and they can provide valuable opportunities for long-term investors. By taking a thoughtful and strategic approach to managing a TSP decline, you can position yourself for potential future growth and continue working towards your retirement goals.

In summary, if your TSP fell last year, resist the urge to panic and instead focus on evaluating and potentially adjusting your investment strategy, rebalancing your portfolio, and staying the course with a long-term perspective. By doing so, you can work towards maximizing the potential of your TSP for retirement.