Set your investment goals for success.

The most successful savers make saving a priority. See our guide on contribution limits and strategies for the current year for more guidance. Once you feel comfortable and have set your savings plan into motion there are three primary “pitfalls” you will want to navigate.

Three Most Common Mistakes

1. Incorrect Investment Allocation: The first issue we see is the failure to set the correct investment allocation for your years of service, age and stage of career. You can learn more about your investment options at www.tsp.gov. You can see our articles or download one of our reports personalized for you to give you specific insight for your situation, age and retirement timeline.
2. Thinking you can “time the market”: The second issue is people that set a plan then start to “time” the market. Meaning, people try to predict what the markets will do based on their interpretation of current events. They are constantly moving money and adjusting based news trends and “gut feelings”. Many books and articles have been written on this subject. You may be right some of the time, but in most cases over time you will have the tendency to get out and back in at the wrong time which will cost you more in the long run compared to having an appropriate strategy for you.
3. Not saving enough: The third issue arises when people who do not save enough from their paycheck each pay period. For most, simply savings 5% of your pay to get the maximum match is not enough. Best practices for your success is to contribution 10-15% of you pay at a minimum. Even if you cannot start off with the high savings rate, see if you can build a plan where each year you try to save an extra 1% until you achieve the goal you want.

 Summary

1. Make yourself the priority and make your first monthly bill be to yourself via your TSP. The most successful federal employees prioritize savings that is automated and reoccurring.
2. Start with a comfortable contribution for your budget. You can download our Budget Template which may help you get started to better understand how much extra you can afford to save each pay period.
3. The most successful federal employees contribute at least 10% of their paycheck to the TSP. This means that with your agency matching at 5%, you will save a total of 15% each pay period.
4. Try adding 1% extra every few months to see how a gentle increase works with your budget. Remember, you can always change it back down.
5. For younger employees – generally under age 60, look closely at the ROTH TSP. The tax benefits can really improve your situation. You will want to take into consideration your income and your tax bracket prior to making a final decision on using the TSP Traditional vs. TSP Roth.