The Surprising Way the National Debt Could Boost Your Retirement

June 17, 2025

Yesterday, we warned you about a retirement risk most federal employees aren’t prepared for:

The hidden pension threats that escalate in times of geopolitical tension and war.

Today, we’re taking a different lens. One that might surprise you.

Because while some headlines scream panic about America’s $35 trillion debt, the truth is more complex—and, oddly, more favorable for long-term investors like you.

The Debt Bomb That Doesn’t Always Explode

It’s easy to assume massive national debt means doom: higher taxes, inflation, market chaos.

And over the long arc of history, yes, debt mismanagement can cause deep economic problems.

But here’s what most analysts miss: for long-term investors with diversified assets, the national debt often creates policy conditions that prop up markets, not crash them.

Why Debt Can Support Your TSP (Yes, Really)

1) Big debt = pressure to keep rates low.

The U.S. government needs to manage its own borrowing costs. That creates a powerful incentive for policymakers to maintain relatively low interest rates.

For TSP investors, this often means:

  • Higher valuations in equity funds (C, S, I)

  • Stronger performance in bond-heavy funds (like the G and F)

2) Debt drives spending. Spending drives markets.

Large federal debt usually results from large federal spending—on defense, infrastructure, technology, healthcare.

All sectors that boost corporate earnings and economic activity, which fuels the very markets your TSP is invested in.

3) You’re in the system. And the system wants stability.

As a federal employee or retiree, your pension and TSP are deeply tied to government-backed systems.

Ironically, the larger the debt, the more pressure there is to keep these systems stable and functional to preserve trust.

Should You Ignore the Debt?

No. But you should understand how it actually plays out.

Here’s the key:

  • Short-term fear sells headlines.

  • Long-term structure creates wealth.

That doesn’t mean debt doesn’t matter. It means that, for now, the way our system is built creates unusual tailwinds for disciplined, diversified retirement savers.

What You Can Do Now

  • Diversify within the TSP: Use all five core funds strategically, not just the G Fund. Don’t let fear overrule long-term allocation logic.

  • Stay alert, not reactive: Keep an eye on policy changes—but don’t assume every political headline requires immediate action.

  • Plan for volatility—but invest for resilience. Debt will create bumps. But it also builds the economic scaffolding that’s helped many federal retirees reach 7-figure TSP balances.

Bottom Line:

Debt is a long-term concern.

But it also drives the very forces that support market growth, federal paychecks, and retirement stability.

In a strange twist of economic fate, your retirement might be safer because of the national debt—as long as you’re ready to pivot when things change.

—Federal Wealth Retirement