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Investor types

There’s always risk associated with investing. But don’t let the risks prevent you from developing and maintaining an investment strategy through each phase of your working years.

Early career

The earlier you start saving for retirement, the more years you have to weather short-term market fluctuations and to gain the maximum benefit from the power of compounding.

How you distribute your money among the TSP funds should reflect your time horizon, or when in the future you’ll need retirement income, and your risk tolerance. Since you have many years ahead of you, you can probably afford to take some risk. That is, you can consider investing in our stock funds (C, S, and I Funds) in addition to the G and the F funds. Our TSP stock funds, while they present more risk, offer the opportunity for potentially higher returns over time.

Also, by spreading your investments across the different funds, you become less open to dramatic losses that might be associated with having all of your money in a single asset.

Mid-career

If you haven’t started saving for retirement already, it’s not too late—start contributing now. And if you’ve been saving steadily, you will definitely want to stay on track.

At this stage of your career, your time horizon is shorter than when you first started working. This might be the right time to revisit your investment allocation to assess the amount of risk you’re taking in your TSP account. That is, if you’re heavily invested in the TSP stock funds or solely invested in the G Fund, you’ll want to be sure that your allocation is appropriate, given other retirement resources you may have.

Nearing retirement

The closer you are to retirement, the shorter your time horizon. As a result, your primary focus might shift from growth and accumulation to safety and preservation. Even if your risk tolerance is very high, you may not have time to recover from severe drops in the market if a large portion of your account is allocated to stock funds. If you determine that you have not saved enough, a better alternative might be to increase your contribution amount than to take on more risk.

If you’re heavily invested in the stock funds, now is the time to consider shifting to a more conservative allocation, especially if you do not have other retirement funds safely invested elsewhere.

However, you’ll likely spend many years in retirement and, as a result, you could risk outliving your money. Be aware of this as you determine whether some portion of your account should be invested in the stock funds to take advantage of their long-term growth potential.