Common Mistakes Made With Your TSP and 401K - YouTube

Hey there, Let’s talk about some of the common mistakes made with the Thrift Savings

Plan and a 401K.

Generally, people have either a Thrift Savings Plan if they are in the military of federal

government or a 401K if you are working in the private sector.

And these are great retirement vehicles that you should be shoveling money into whenever

you are able to.

The maximum amount you can contribute in 2022 has been increased to $20,500.

So, what are the common the mistakes people with these retirement vehicles?

1.

Taking Loans on your TSP or 401K It’s a mistake to take a loan from your

retirement savings.

when you borrow or withdraw money from your retirement savings.

You are essentially stealing money away from your older self.

Your older self will not have that money in the future to live.

It can be understandable if it is to pay for a catastrophic medical bill.

But you should not consider it for a home renovation or a vacation.

Also, If you leave federal employment with an outstanding TSP loan you have to pay back

the full loan balance within 90 day.

Do not take loans off of your future self unless it is life or death.

2.

Investing too conservative while young Its not a secret that the financial education

in this country is severely lacking and many young people entering in the workforce have

no idea what they should be saving or investing in at all.

They join the military or federal government at a tender young age and a lot of times they

do not put much time or energy into understanding it.

Speaking of that check out my video in the corner that explains the TSP.

So, when we are younger, we can tend to feel like we need every penny of our pay check

and then we do everything we can to maximize our paycheck so that we can enjoy ourselves

on the weekend.

Maybe buy the latest TV, computer or smart phone.

I understand that.

But you do not want to be conservative with your TSP or 401K contributions.

When you get paid, you should be paying yourself first by investing in these accounts.

You would be doing yourself a disservice by being distracted in the present and not planning

for the future.

3.

Panicking about a Recession or Market Crash Our Financial Markets will always rise and

fall.

A recession is a period of temporary economic decline.

I am 40 years old.

And in my lifetime, there has been a total of 5 recessions.

The average U.S. recession lasts about 21 months.

This is the nature of our financial markets.

But what usually follows a recession is a longer bull market of strong gains.

Unless you are seriously thinking about retiring in the next year or two then you should not

allow the markets to cause your anxiety or panic.

If anything, you should be welcoming a recession and contribute even more money because you

are taking advantage of discounted prices.

4.

Abandoning 401k or TSP when leaving your job (cash out)

Every year, there are hundreds of thousands of retirement plans that are misplaced or

forgotten by employees who leave their jobs.

If you like your current 401(k) or TSP, make sure you keep up with its login information

and check in regularly.

If you don’t like your plan because it charges you high fees when you’re no longer with

the company, then you need to roll it over into your next job’s retirement plan or

into an individual retirement account.

Resist the urge to cash out of your 401k or TSP and blowing the money on a depreciating

asset like a car, new clothes or electronics.

I hear so many stories of people who work at a job for 2 or 3 years and completely changes

job sectors and decide just to blow the money on a vacation or something that is not an

investment.

Please don’t do that.

5.

Not fully taking advantage of your Employers’ Match

If you are in the military or an employee of the federal government and you aren’t

contributing at least 5% to your TSP plan then you are leaving a significant amount

of money on the table.

A person making 60k a year that does not contribute at least 5% would be missing out on an extra

$3,000 of free money a year.

If you have a 401K then your company could match your contribution all the way up to

6% of your salary.

An employee making 100k a year would be missing out on an extra $6,000 of free money a year.

Finally, consider that The average American will retire at age 66 and live until nearly

80.

So, that is at least 14 or more years of retirement and in a lot of cases it is more than that.

We all want to be able to retire with dignity and on our own terms and we should remember

that when contributing to our retirement accounts.

Well, That pretty much wraps up the video on Top 5 Mistakes Made with TSP & 401K.

If you have any questions or comments please leave them down below.

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Thank you for watching!