COVID Concerns for TSP

Retirement investors are nervous. I understand why. One look at our first-quarter statements shows the impact historic market declines have had on the account balances of millions of Americans. Some questions you might have right now are whether to sell out, shift your investments to more conservative options, or stop contributing to retirement all together.

To make the right choices for the long-term, it’s important to step back from short-term thinking.

I know that’s not easy. News about the pandemic and its economic impact seems all consuming, but keep in mind how far you are from your goal. Whether you’re 30 years from retirement, or it’s around the corner, your strategy will succeed or fail based on market trends over years or decades, not the last 30 or 60 days. The big three questions for a retirement plan haven’t changed: How much should I be saving? How should I invest my savings? How much can I expect to have in retirement?

In this unprecedented environment, financial professionals might have some answers that might surprise you. For example, increasing your savings rate and sticking to your investment plan may make more sense than retreating from the market.

Now I know there are only a few options in the TSP but utilizing those the right way is critical right now.  Markets are still volatile and despite the feeling that everything is heading down, it’s still just as difficult to predict which way markets are going in the short term. In March, the S&P 500 posted a daily loss on 12 trading days, and a daily gain on the other 10. Rebalancing over time reduces the impact of bad timing.

Protecting retirement savings is very important, but some people may need those funds for essential expenses right now. We urge people to seek professional financial guidance before turning to their retirement money so that you evaluate all alternatives and understand the long-term consequences, including missing future potential market gains and tax implications