If you’re a federal employee planning to retire within the next several years, market volatility can feel more amplified today than it might have earlier in your career. A sharp market swing can raise questions about timing for retirement, confidence, and financial stability, especially when your Thrift Savings Plan (TSP) represents a meaningful portion of your retirement income.
For many near-retirees, volatility doesn’t just affect account balances – it affects confidence in timing, income, and long-term security. The good news is: while markets move in cycles you can’t control, there are several important levers inside your TSP that you can control. Making informed financial decisions, rather than emotional reactions, can help you navigate market volatility, protect the progress you’ve made, and support a smooth transition into retirement.
Let’s dive deeper into how TSP fund options work, how volatility impacts near-retirees differently, and which strategies may help you stay aligned with your long-term retirement process.
Understanding TSP Fund Categories
Safe / Defensive Funds
G Fund: Principal Protection and Interest Stability
The G Fund is unique within retirement plans. It is backed by the U.S. government and is designed to preserve principal while earning interest. During volatile or declining markets, the G Fund does not experience market losses, making it an important stabilizing option, particularly for funds earmarked for near-term income needs.
F Fund: Bond Exposure and Interest Rate Sensitivity
The F Fund invests in “fixed-income” or bonds. During times of falling interest rates, the F Fund may experience gains from the resulting rise in bond prices. While often considered more conservative than stock funds, it is not risk-free. Bond prices can decline when interest rates rise, which can increase volatility for the F Fund during certain economic cycles. Understanding this distinction is important when evaluating defensive positioning.
Stock / Growth-Oriented Funds
C Fund: Large U.S. Companies
The C Fund, or common stock index, tracks the performance of large U.S. companies in the S&P 500 and broadly reflects overall U.S. market performance. It has historically provided long-term growth, but it can experience meaningful swings during periods of market uncertainty. C Fund has historically provided the highest long-term growth among core TSP funds.
S Fund: Small- and Mid-Sized U.S. Companies
The S Fund focuses on small- and mid-sized companies not included in the S&P 500. The S Fund includes 3,000+ companies covering small and mid-cap size. These companies may grow faster during expansions, but they also tend to experience sharper declines during downturns, increasing overall volatility. It complements the C Fund rather than duplicating it, or is often used in conjunction with the C Fund.
I Fund: International Exposure
The I Fund provides exposure to developed international markets outside the United States. It invests in large- and mid-cap companies from developed foreign markets, including Japan, United Kingdom, France, Germany, Switzerland, and Australia. While diversification can be beneficial, this fund introduces additional variables, such as currency fluctuations and geopolitical risk, which can be sources of short-term volatility.
Balancing Risk and Financial Stability
As retirement approaches, risk decisions become more personal and more permanent. This does not mean growth becomes irrelevant—but it does mean risk must be aligned with your retirement timeline and income needs.
Key considerations include:
- How soon do you plan to retire?
- When you expect to begin TSP withdrawals?
- How much income will your FERS pension and FERS Supplement/Social Security provide monthly?
- How much market risk you are willing—and able—to tolerate
A portfolio that made sense earlier in your career may not provide the same level of financial stability as you approach retirement.
Market Timing Is a Two-Way Decision
Moving money to the G Fund during uncertain markets may feel reassuring. However, that decision does not end with the transfer.
Any move away from growth funds should include a clear re-entry plan. If funds are moved out of C, S, or I Funds, there must also be a disciplined strategy for when—and how—to re-enter the market. Many investors miss potential recoveries by waiting too long to move back in.
Rather than reacting to headlines, consider whether each move supports your broader retirement income strategy. For example, funds needed in the first few years of retirement may be positioned differently than assets intended for later income.
Reviewing and Maintaining TSP Contributions
Even during volatile markets, consistent contributions remain important. However, the contribution strategy should be reviewed as retirement nears—particularly contribution levels and tax treatment (Roth vs. Traditional).
A common mistake during market volatility is moving funds out of the market without a clear plan for moving them back in.
TSP Fund Changes and Transfer Rules
TSP allows two unrestricted interfund transfers per month. Additional transfers must move money into the G Fund. These limits encourage strategic planning rather than frequent trading.
Before making changes during volatile periods, ask:
- Does this align with my retirement timeline?
- Am I addressing income needs or reacting emotionally?
- What is my plan after this change?
Slightly Over-Valued Market Conditions
When markets are described as “slightly over-valued,” it generally means prices are higher than long-term averages—not that a downturn is guaranteed.
For near-retirees, the goal is not to time the market, but to manage expectations and risk exposure as retirement income becomes the priority.
What Market Volatility Means for Retirement Income
As retirement approaches, market volatility affects more than just account balances, it can directly impact income timing.
Earlier in your career, short-term market swings were easier to ride out. Near retirement, however, your TSP begins to shift from a growth-focused account to an income resource. That change makes coordination more important than reaction.
Funds needed in the early years of retirement often serve a different role than assets intended for later income. This is where income sequencing becomes important, deciding which dollars are used first and which remain positioned for longer-term growth.
When your withdrawal timing is aligned with your broader retirement income plan, volatility becomes something you plan around rather than something that drives decisions.
Strategic Review Checklist: A Retirement Planning Snapshot
As retirement approaches, market volatility can be a useful prompt for a broader strategic review. Before making changes, consider whether you have clarity in these areas:
- Retirement timing and income start dates
- TSP allocation aligned with near-term and long-term income needs
- Contribution and tax strategy (Roth vs. Traditional)
- Income sequencing and withdrawal planning
- Coordination of TSP, pension, and Social Security
If any of these areas feel uncertain, a coordinated review may help bring clarity and confidence to your retirement planning.
Conclusion: Planning for a Smooth Transition
Market volatility is normal. What matters most is how prepared your overall retirement plan is to handle it.
As retirement approaches, clarity around timing, income coordination, and withdrawal strategy becomes increasingly important. A well-structured TSP strategy—viewed alongside your pension and Social Security—can help reduce uncertainty and support long-term financial stability. When these pieces are aligned, market volatility becomes something you plan around rather than something that drives decisions.
At Benchmark Financial Group, we specialize in helping federal employees navigate the retirement process with clarity and confidence. If you are within five years of retirement, a strategic review may help ensure your TSP decisions are aligned with your broader retirement income plan.
Ready to Take the Next Step?
If you are within five years of retirement, it may be time to take a closer look at how your TSP, pension, and Social Security work together. A strategic review can help confirm whether your current approach supports your retirement timeline, income needs, and long-term financial stability.
Scheduling a conversation with Benchmark Financial Group is a practical next step for gaining clarity and making informed financial decisions as you prepare for retirement. Getting started is easy – visit bfgkc.com/schedule-appointment or call David Raetz at 913-534-8256.
Want to learn more? Attend our free online webinar led by David Raetz on February 18, 2026.
Navigating Market Volatility as Retirement Approaches
Learn how to plan around market volatility as retirement approaches. We’ll discuss how thoughtful planning and decisions can keep market swings from driving your choices.
*Securities and Advisory Services Offered Through CreativeOne Securities, LLC Member FINRA/SIPC and an Investment Advisor. Benchmark Financial Group, LLC and CreativeOne Securities, LLC are not affiliated.
“*Annuities contain limitations including withdrawal charges, fees and a market value adjustment which may affect contract values. Annuities are products of the insurance industry; guarantees are backed by the claims-paying ability of the issuing company. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.”
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