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Ask Dave

Dave's Thoughts on Thrift Savings Plan

Dave has a breakdown of what money you should put into which funds of a TSP account.

QUESTION: Kayla on Twitter wants to know what Dave thinks about governmental thrift savings plan (TSP) accounts.

Dave's ANSWER: The first thing we suggest you have is that you are debt-free except your home before you begin your long-term investing and you have an emergency fund of three to six months of expenses before you being the investing.

Then if your thrift savings plan matches, we start with the TSP up to the match. If it does not, then we start with the Roth IRA outside of there because I would rather have a non-matching Roth IRA that grows tax-free than a non-matching TSP that grows tax-deferred. Tax-free is better than tax-deferred.

But either way, if you've maxed out your Roth IRA and want to do some thrift savings plan saving, or if you have one that does match, then you want to look at that for sure and get the match. We recommend that you put in a ratio of 80-10-10 or 60-20-20. That means put 80% in the C fund (common stock fund), the other 10% in the S fund (small-cap stocks) and 10% in the I fund (international).

In the S and I funds, either put 10% in each or 20% in each and then 80% or 60% in the C fund. Put the vast majority of it in the C fund.

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