Investing for Safety in an Unpredictable Economy

These current economic times can feel like a whirlwind of market ups and downs against a backdrop of dire predictions and conflicting advice. Knowing what choices to make and when can make retirement planning feel even more difficult. Meanwhile, Federal employees face additional complications when deciding where to invest within the Thrift Savings Plan, or TSP. Knowing when and how to roll their TSP into lifetime income for themselves and their families is also a factor.

Recovery Takes Time

Many advisors suggest holding the line, saying the market always recovers from the crash. This may be good advice for younger investors, but consider this: In 1999, we experienced three consecutive down years that took five years to recover, for a total of eight years to make up the lost money for investors. If you are under 50, you might have time to wait out the instability, but what if you are planning to retire sooner?

A Lot Can Happen in Eight Years

Presuming current instabilities recover in eight years as they did in 1999, even when the market recovers, older investors have lost eight years of dividends and growth, while eight years of inflation have also hit the total value of their money. This means that in the time it took their account to return to the original investment amount, they have lost another few years of growth. Young investors have time to recover and grow, buying into the dips, but the danger of market losses is serious for those approaching retirement.

The Pending Retiree Protection Two-Step

If you plan to retire in the next ten years, you may need more time to recover from significant market losses. The time is now to protect your retirement funds from painful losses you won’t have time to recover from. You can do this in two ways: Electing safer funds within the TSP, or taking pre-retirement withdrawals and rolling into investment vehicles that can protect you from market losses while ensuring lifetime income on your terms. 

Learning more

Our Federal Employee Benefits Consultants would be happy to help you make choices that protect your valuable retirement savings. We offer a free Federal Employee Benefits Analysis to Federal employees nearing retirement that covers financial protection and gives you a clear picture of your whole household income and expenses in retirement. You can contact us here for more information!