In times of economic uncertainty, TSP investors should hold on to their long positions.

Sometimes you have to stop worrying about the future and start thinking about how to limit your losses. However, that strategy isn’t necessarily the greatest for regular folks saving for a retirement that may last 10, 20, or 30 years.

After decades of generally positive news, the stock market is showing signs of instability. Investors in the Thrift Savings Plan

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(TSP) are used to high returns, with temporary setbacks taking the place of prolonged downturns in markets. Since May 2009, when the Great Recession officially ended, life has generally been decent, if not exceptional. The TSP is an essential benefit for FERS-eligible federal and postal employees. As much as half of their lifetime income in retirement may come from this source. It’s a three-legged stool that Congress built for them in the 1980s, with the other two legs being their government retirement annuity and Social Security. While the improvements are welcome, FERS workers will need to put in extra time, effort, and discipline to earn the same as they would have under the previous CSRS system. To achieve the same or greater returns than under CSRS, businesses will need to spend more strategically and more aggressively. It is possible, however. Most current TSP millionaires are former Federal Employees Retirement System (FERS) workers or retirees who contributed the maximum allowed (to receive the government’s full 5 percent match) and who continued to invest in stock-indexed C, S, and I funds during the Great Recession when the market tanked and created a frightening buyer’s market.

Extended-term, no-panic investing is easy to discuss when circumstances are good, as they have been for an abnormally long period recently. But it might be challenging to continue the course and get some rest when things get rough, and the market collapses (sometimes quickly).

We now have a dangerously divided society at home, massive inflation, and record high gas costs, not to mention the ongoing conflict between Russia and Ukraine and China and Taiwan. And a persistent epidemic that has already killed a million Americans and changed the face of the planet. Furthermore, there is an acute scarcity of baby formula. And when will monkey pox break out?

What if this time, right now, becomes the golden age? Worst case scenario: things become a lot worse before they get better. Whom did we consult then? The famous Washington-area financial advisor Arthur Stein comes to mind. His typical clientele is current or former members of the federal government. Several people have amassed million-dollar TSP balances, and it’s not always despite the Great Recession.

A more favorable financial picture might be seen with longer return periods.

Despite recent drops, all three stock funds (C, S, and I) have fared well over the past three years. Well enough to provide annualized returns that were much greater than bond funds (G and F). Worst-ever falls in the F fund vanished, too.

This serves as a timely reminder to TSP members that they should factor withdrawal needs for things like annuities and Social Security into their allocation selections. As an example:

Money that won’t be needed for at least ten years is a good candidate for equity mutual funds.

The L funds operate uniquely. Their initial allocation was between 80% and 99.9% to equities (C, S, and I) and the rest to bonds (F and G). Over time, a larger proportion of wealth is held in bonds than in stocks. At maturity, L funds shift their holdings to the L Income fund, which is currently composed of 75% bonds (mainly G). That is not a perfect plan; therefore, you should count on losing. All L-funds are now losing money. The L Income Fund is included.