Putting 5 Popular TSP Beliefs on Trial

If you listen in on enough break-room conversations, you’ll hear the same TSP “wisdom” pop up over and over.

Some of it is helpful.

Some of it is half-true.

And some of it quietly bends your retirement plan in the wrong direction.

So, in this edition, we’re convening Retirement Court and calling five popular TSP beliefs to the stand.

You’ll hear from:

• The Prosecutor – the math, the risk, the long-term reality

• The Defense – the emotions, fears, and habits that keep these beliefs alive

• The Judge – your clear, practical takeaway

Court is now in session.

Case #1: “The G Fund is safest, so I’ll park most of my money there near retirement.”

The Myth

“The G Fund never goes down. I’m close to retirement, so I’ll just move most of my TSP there.”

Prosecutor

• The G Fund shields you from market drops, but not from rising prices.

• Over 20–30 years of retirement, inflation can quietly shrink what your G-heavy balance can actually buy.

• Dollars you won’t touch for a decade or more still need some growth, not just stability.

Defense

• Seeing C, S, and I bounce around when your balance is at its peak can be nerve-wracking.

• The G Fund makes your account feel “solid” and can help you sleep at night.

• For money you plan to spend in the near term, G is a very reasonable landing spot.

Judge’s Verdict

Next Step to Consider

• Keep roughly 1–5 years of planned withdrawals in G (and possibly F).

• For money you won’t need for 10+ years, consider an appropriate L Fund or a mix that includes growth funds (C/S/I).

Case #2: “I’ll be in a much lower tax bracket in retirement, so Roth doesn’t make sense.”

The Myth

“I’ll earn less when I’m retired, so I’ll be in a lower tax bracket. I’ll stick with traditional TSP only.”

Prosecutor

• With a FERS or military pension, plus Social Security and a sizable traditional TSP, your retirement income can still be solidly in the middle brackets.

• Required minimum distributions (RMDs) from traditional TSP can push taxable income back up later in life.

• Tax laws and brackets can change. Building your entire strategy on “I’ll definitely be in a much lower bracket” is guesswork.

Defense

• Traditional contributions lower your tax bill today, and that benefit is easy to see.

• In lower-income years or part-time work, the deduction can be especially valuable.

• Thinking about future tax brackets and RMDs can feel abstract and easy to postpone.

Judge’s Verdict

Next Step to Consider

• If you’re mid- or late-career with strong pension prospects, you might:

  • Shift a slice of new contributions (say 10–30%) to Roth TSP, or

  • Direct future raises and step increases to Roth while keeping your base rate traditional.

• The point isn’t perfection—it’s giving future you choices.

Case #3: “I’m starting late, so maxing out isn’t worth it.”

The Myth

“I didn’t take TSP seriously until my 40s or 50s. At this point, maxing out won’t move the needle.”

Prosecutor

• Even 10–15 focused years of saving can dramatically improve your retirement picture.

• Higher contributions now can mean:
  ➤ A larger TSP balance when you retire
  ➤ Less pressure to pull heavily from TSP in your 60s and 70s

• Catch-up contributions (for age 50+) exist specifically so “late starters” can close the gap.

Defense

• At this stage you may be juggling college, aging parents, debt, or health costs.

• “Maxing out” sounds impossible if you’re starting from a modest percentage.

• There’s a real fear of committing too much and then needing the cash for emergencies.

Judge’s Verdict

Next Step to Consider

• Increase your TSP contribution by 1–2%, not all the way to the limit.

• Each time you receive a step increase or promotion, direct part of that raise straight into TSP.

• Treat each extra percent as buying back future peace of mind.

Case #4: “I’ll ‘fix’ my allocation when I have more time.”

The Myth

“My fund mix probably isn’t ideal, but I’ll sit down and fix it someday when work and life calm down.”

Prosecutor

• An allocation that’s too conservative can hold back growth for years.

• One that’s too aggressive near retirement can expose you to big downturns at the worst time.

• “Someday” is where a lot of TSP accounts drift for entire careers.

Defense

• The alphabet soup—G, F, C, S, I, L—can be intimidating.

• Many participants fear making a “wrong” move more than leaving things as they are.

• Between work deadlines and family obligations, TSP fine-tuning rarely feels urgent.

Judge’s Verdict

Next Step to Consider

• If you’re unsure where to start, look at an L Fund that roughly matches your retirement time frame.

• Put a 15-minute “TSP tune-up” on your calendar this month: log in, review your funds, and make one small improvement.

Case #5: “L Income is where everyone should be on their retirement date.”

The Myth

“When I retire, my TSP should automatically move into L Income. That’s the goal, right?”

Prosecutor

• Your retirement date isn’t the finish line—it’s often the midpoint of a 25- to 30-year horizon.

• Retiring at 57 or 60 means your money may need to support you well into your 80s or beyond.

• L Income is designed to be very conservative, which can mean lower long-term growth and more inflation risk.

Defense

• For those who truly dislike volatility, L Income’s smoother ride can help prevent panic selling.

• If your pension and Social Security already cover most essentials, a conservative TSP may be perfectly acceptable.

• The automatic glide path into L Income feels simple and “done”—no extra choices required.

Judge’s Verdict

Next Step to Consider

• Ask yourself:
  ➤ “How long does my TSP really need to last?”
  ➤ “Can I tolerate some ups and downs if it improves my odds of outpacing inflation?”

• Consider a two-bucket approach:

  • A portion in L Income for near-term withdrawals, and

  • A portion in a later-dated L Fund (or a mix with growth funds) for long-term money.

Best,
—FWR