It’s often assumed that the golden rule of retirement saving is to contribute as much as possible to your Thrift Savings Plan (TSP). But in reality, “maxing out” isn’t always the best move. Depending on your stage of life, debt, or financial needs, there are times when pulling back slightly can actually put you in a stronger position overall.
Financial planner Dana Ellis often reminds clients that investing is about balance, not extremes. “The right contribution level depends entirely on your situation,” she says. “There’s no single number that works for everyone.”
To understand what that balance looks like, let’s look at three different points along a career journey — nearing retirement, mid-career, and just starting out.
Nearing Retirement: Don’t Starve Your Cash Flow
When you’re a year or two away from retirement, your financial picture is clearer — but it’s also more fragile. Many people in this stage are still maxing out their TSP contributions, even if they’re carrying credit card debt or haven’t built up an emergency fund.
Ellis explains that this can be a mistake. “If you’re about to retire and you’re going to need to start pulling money from your savings soon, there’s not much benefit in locking extra funds away in your TSP right before you stop working,” she says.
A better strategy might be to reduce contributions to around 5%, just enough to get the full employer match. Use the freed-up income to pay down debt, build cash reserves, or beef up insurance coverage. That way, you enter retirement more flexible and less financially stretched.
Mid-Career: Balance Growth With Protection
For those in their 30s, 40s, or 50s — deep in their working years — the financial puzzle gets more complex. Ideally, you’re increasing contributions and taking advantage of compound growth, but you also need to protect what you’re building.
“Mid-career workers should check the basics first,” Ellis advises. “Do you have at least three to six months of emergency savings? Is your insurance coverage adequate? And are you carrying high-interest debt?”
Credit card debt, in particular, is a red flag. Paying it off will almost always yield a better return than keeping it while maxing out your TSP.
Insurance is another overlooked piece of the puzzle. Someone single and healthy may not need much life insurance, but a person with a family and one income earner should consider robust coverage. Private term insurance often provides better value than group coverage through work, but for those with health challenges, employer-sponsored plans can be a lifesaver.
Once your essentials — debt, savings, and insurance — are in place, maxing out your TSP becomes a powerful wealth-building tool. But not before.
Early Career: Start Strong and Stay Consistent
For younger employees just beginning their federal or public service careers, the key is simplicity and consistency. Most are automatically enrolled in the TSP, with 5% of their salary contributed each pay period — enough to receive the full employer match.
“That automatic setup is one of the best things that’s ever happened for new employees,” says Ellis. “Once it’s in place, most people don’t change it — and that consistency is gold.”
A 5% contribution matched by another 5% from the employer means you’re investing 10% of your salary every year, right from the start. Keep that habit going, increase your contribution as your income rises, and you’ll be amazed by how much it grows over a few decades.
Rethinking Everyday Spending
Budgeting isn’t just about cutting costs — it’s about awareness. Financial advisor Mark Rivers points out that many people underestimate where their money actually goes.
“Track everything,” he says. “That $6 coffee on your way to work? That’s $1,200 a year. It’s not about guilt — it’s about knowing what you’re choosing.”
He also notes that people often forget to include the real costs of pet ownership in their budgets. “Vet bills, food, insurance, even advanced medical care — it adds up. And that’s fine if it brings you joy, but you have to plan for it.”
Rivers emphasizes that thoughtful spending helps you fund what truly matters — and keeps your TSP contributions sustainable over the long term.
Balancing Now and Later
The hardest part of financial planning is finding equilibrium between living comfortably now and saving responsibly for the future. Telling someone to give up their morning latte might work on paper, but it rarely works in real life.
Instead, Ellis recommends looking for meaningful trade-offs. “If something brings you genuine happiness — like your pet or your hobbies — budget for it. But make sure you’re still contributing enough to at least get your TSP match. Otherwise, you’re turning down free money.”
The Takeaway
Investing wisely isn’t about doing the maximum — it’s about doing what’s most effective for your situation.
- Near retirement? Focus on liquidity and debt-free living.
- Mid-career? Strengthen your foundation before ramping up contributions.
- Just starting out? Keep your automatic savings and let time work its magic.
The key is to make sure every dollar you invest serves a purpose — one that aligns with your goals today and your dreams for tomorrow.
