Guide to Managing Your Thrift Savings Plan (TSP)


  • Core options. There are several good core options available at institutional level cost.

  • Costs. The benefits of low-cost investing has been shown to be the surest predictor of relative fund performance versus peers.

  • G Fund. One of the unique features of the TSP is the G Fund. This fund holds special US debt securities that guarantee principal value does not fluctuate and pays a rate that should be higher than other safe savings options.

  • Roth option. Especially when beginning to save the Roth option provides an opportunity to minimize your future tax burden.


  • Limited opportunities to diversify. While limited diversification is common of most retirement plans, the lack of investment options detracts from attractiveness of using the TSP as your only investment account.

  • Limitations on withdrawals. An underestimated component of retirement planning is planning for withdrawals. The TSP Plan is a great plan for accumulation, but only allows 1 lifetime partial distribution.

  • Lifecycle funds. The L Funds are meant to be a managed portfolio based around an expected retirement date. We strongly discourage their use as the only investment option, and given the alternatives believe they should not be considered.

As your retirement date passes, the L Funds change from a Target Date (2020, 2030, 2040, etc.) to the L Income fund. In our professional opinion, the L Income fund is inappropriate for all but the most risk adverse investors, and it is not appropriate for those with a long time horizon remaining in retirement.

Strategically, the weightings of the underlying fund choices in all of the L Funds are less than desirable. A more diversified mix across stock asset classes with a tilt toward value stocks may improve results for the long-term investor.

Overall, the funds have little to offer over investing in the lower cost index fund choices available in the plan.


One of the advantages of plans like the TSP that have solid core holdings is that in a rounded out portfolio these often will be the largest need in a diverse portfolio, and they are available at a lower cost than can be purchased independently.

One strategy is to use the TSP funds for your core portfolio and diversify further outside of the plan. By utilizing a companion IRA, Roth IRA, or taxable account, one can take advantage of very low-cost core investment options in the TSP, and supplement them with independent savings outside of the plan.

If you receive a match and are saving at a rate above the TSP match, consider your other options for transferring that additional savings to other tax advantaged accounts outside of the TSP. If you do not receive a match, weigh the tax options you have available to you.

Depending on the particulars of your tax and investment situation you may be eligible for and benefit from:

  • A deduction for making IRA contributions

  • A Roth IRA where your contributions grow tax-free

  • A non-deductible IRA conversion strategy for savers who are phased out from traditional tax-benefits

It may also be in your benefit to invest in a taxable account. There are significant benefits to the current and future diversification of holding a combination of taxable, tax-deferred (pre-tax), and tax-free (Roth) accounts.

You may also take advantage of the benefits available within a spouse or partner’s plan to achieve greater diversification and create a holistic investment strategy over the best options available to you over all of your plans.

Asset Classes to Complement Your Thrift Savings Plan

It is important to not minimize the fact that the investment options provided do not cover the world of available options. By not being able to participate in markets, you may reduce return potential and increase volatility. See our Forbes post on how a retirement plan with basic options can cost a saver millions of dollars over their lifetime.

Below is a list of asset classes to utilize in your own accounts that complement our model recommendations:

  • Domestic Marketwide Value

  • International Marketwide Value

  • International Small Cap

  • Emerging Markets Core

  • Emerging Markets Marketwide Value

  • Emerging Markets Small

  • Diversified, short-term bonds

  • Foreign Bonds

  • Real assets including global real estate, commodities, and precious metals

Using an effective combination of the above investment categories in combination with your TSP can improve your investment experience. The benefits of increased diversification can result in a less volatile portfolio.

For more information on the above strategies and other investment ideas linked here is a complementary PDF version (Password = clearandfree) of our book Clear Investing, Intentional Investing.





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Clear Financial Advisors, LLC

39111 Six Mile Road

Livonia, MI 48152


Past performance is not indicative of future results. Differences in account size, timing of transactions and market conditions prevailing at the time of investment may lead to different results, and clients may lose money. Clients should consult with their personal tax advisors regarding the tax consequences of investing.

Clear Financial Advisors uses independent firms such as Betterment, TIAA, and TD Ameritrade, Inc. to custody client assets. Betterment, TIAA, TD Ameritrade, Clear Financial Advisors and the other entities named are separate and unaffiliated firms. Betterment, TIAA, and TD Ameritrade do not endorse or recommend any financial advisor and the use of the Betterment, TIAA or TD Ameritrade logos does not represent the endorsement or recommendation of any advisor. Brokerage services provided by TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. Used with permission.