Why Do I Need a Financial Planner if I have a TSP? [Video]

If you’re invested in the TSP and the TSP is your primary vehicle for retirement, then you may be wondering, “Do I need a financial planner? Isn’t the TSP just managing my money for me?” There’s a lot to unpack in that simple question. Let’s start with a misconception about what a financial planner does.


What Does a Financial Planner Actually Do?

A lot of times when you hear financial planner, you get a picture of some guy on Wall Street that’s buying and selling stocks. In our case, that couldn’t be further from the truth of what we do. In fact, it shocks people to find out that on a daily basis, dealing with the investment side of things is a very small part of what we do as financial planners.

What we work on with our clients is developing strategies such as: withdrawing money in retirement, strategies around savings and goals, looking at tax efficiencies, and looking at the right products to accomplish very specific goals. A lot of our time is spent providing advice and guidance, helping our clients work through the math, really doing the planning part of financial planning. Some of what we do is help create investment strategies and manage those investment strategies, but that’s certainly not all that we do.

Whether or not you need a financial planner depends on what your goals are and how capable you are at planning finances, how well-versed you are in the world of financial planning and tax strategies, social security law, and tax law. If you’ve spent years researching, and you have a good grasp on those topics, then there’s a chance that you don’t need a financial planner.

Isn’t the TSP doing that for me?

First, let’s define what a TSP is and what purpose it has. The Thrift Savings Plan (TSP) is a defined contribution plan, which simply means that the employee is permitted to define how he or she will deposit money into the plan.

Federal Employees with a TSP have five different funds to choose from: From the ultraconservative G Fund, which invests in short-term US Treasuries; to the relatively aggressive I Fund, an investment in a stock index fund that tracks large companies in developed countries.

These contributions are generally made pre-tax. In private industries, this type of arrangement is called a 401(k), and in a nonprofit organization, a 403(b).

The purpose of these funds is to be a source of retirement income after retirement. To ensure these funds remain in the account until retirement, policymakers designed a 10% early withdrawal penalty if the funds are disbursed before the age of 59 ½.

The TSP is a self-directed investment. The TSP itself isn’t providing you any guidance or feedback or even managing the investment. You just decide where you want to put the money, and it’s a holding place like a bank for that money, but there’s nobody at TSP that’s really guiding you or providing advice on your investments inside the TSP. That’s up to you to know how to put together that asset allocation.

There’s one caveat. Unless you’re using the L funds (life cycle funds) like the 2020 or the 2030, those are managed by BlackRock. They’re based on a target date. For example, 2030 means that you plan on withdrawing that money in the year 2030, and as a result, that fund becomes more and more conservative as you get closer to that withdrawal date. So, those funds do have a little bit more automation than the rest of the TSP, but again, there is still no one there to advise you. It’s up to you to choose the strategy that’s right for you.

This is where a Financial Planner can be helpful

A financial planner can help guide you on how to use the TSP fund as well as other retirement planning strategies so that you can make a decision about whether that’s something you feel like you need or not. If you have any questions or want to explore this further, let’s have a conversation!

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For over 30 years, federal employee retirement planning has been a key focus of Medallion Financial Group. We recognize that FERS retirement benefits have extra layers of complexity, such as the Thrift Savings Plan (TSP), 401K, Pension plan, FEGLI and more. It’s easy to get lost in a sea of bad advice when so few people understand the basics. We help with the basics and beyond to enable our clients to get the education and advice they need to retire with confidence.

Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.

We strive to exceed client expectations – because we have high expectations of ourselves.