If you’ve looked at your military retirement savings plan this week and panicked, maybe don’t, at least that’s the advice from some military finance experts we spoke with.
President Donald Trump’s trade war — with a 125% tariff on China and others that have been paused for 90 days — has caused quite the whiplash in the stock market but financial coaches and planners who work with the military community said changing investments in the short-term are not ideal for retirement plans.
“Daily, weekly, monthly, market volatility is normal,” said Matthew Gorrell, a financial counselor and financial readiness coordinator at Wounded Warrior Project. “Focus on the long-term growth, the long-term plan. Whether or not you lose money, you still have those shares. [It] will most likely be worth the same amount that they were previously in the future. That’s what’s happened historically.”
In 2018, troops were automatically enrolled into the Blended Retirement System which gives them an annuity after retiring from service and access to the Thrift Savings Plan which
offers similar savings and tax benefits that civilians get from private employers through a 401k. Both accounts have employee and employer contributions, but with the TSP, the service member and the federal agency or military service contributes to it.
In recent weeks, TSP account holders have taken to social media to post about their anxieties over their accounts. Service members with TSPs may see account fluctuations due to the stock market boosts and tumbles, but the best thing to do really is not to panic, said Kyle Packard, a retired Army lieutenant colonel and financial planner specializing in veterans, retiring service members and military families at Packard Wealth Strategies.
“Taking a look at their accounts too often just kind of creates that anxiety and the need to feel like they need to do something when in actuality, the best thing they can do is probably nothing right now,” Packard said. “Continue to invest and just stay invested. Don’t sell out. Don’t go to cash. It’s really hard. It’s much easier said than done.”
The TSP website gives account holders similar advice: short-term movements in stock and bond markets should not drastically change long-term savings plans. By reacting to the short-term, “you could miss out on significant gains,” according to the website.
The financial planners who spoke with Task & Purpose said the decisions might be different for troops earlier in their careers versus others who are closer to retirement. Younger service members can take more risk with their investment decisions versus someone who’s about to retire.
“The greatest thing that young investors have is time and you’d be shocked at the value of compound interest,” Packard said. “That compounds amazingly over decades and really creates long term wealth when you’re young. Little bits of money really, really go a long way.”
If tariffs lead to more costly grocery or home goods prices, troops might think about decreasing their TSP contributions from their weekly paychecks to have more cash in their pockets. If that’s the case, Gorrell said he recommends keeping TSP contributions at the level of “at least getting the employer match because that is a 100% gain on your investment.”
For troops in the blended retirement system, the first 3% of their paycheck’s TSP contributions are fully matched by the service and the next 2% is matched at 50%. “This means that when you contribute 5% of your basic pay, your agency or service contributes an amount equal to 4% of your basic pay to your TSP account,” according to the TSP site.
Heather Walrath, a military financial planner, said “reducing contributions to less than 5% leaves money on the table.”
Moving things around
TSP holders can choose different ways to invest their retirement savings through a mix of investments like short-term federal securities from the U.S. Treasury Department and domestic and international stocks.
Gorrell said a lot of clients have asked about moving their money into the G Fund or the Government Securities Investment Fund which includes bills and bonds from the U.S. Treasury. He cautioned that while their stock market funds might not look good right now, there’s a chance it returns as fast as it fell.
“If they move that money from those shares and sell those shares to go into bonds or the government securities, they’re locking in that loss whereas if they have that ability to be patient and let the market work itself out, it’s likely gonna return back where it was given enough time,” he said.
