What does Dave Ramsey say about the TSP?

Dave Ramsey answers questions from around the world on his hugely popular radio show and has received many, many questions from federal employees about their savings accounts and retirement over the years.

In general, Dave Ramsey has some great advice, but sometimes it doesn’t apply to everyone. The more I think about it, Dave Ramsey has a tough job. He has to give advice on site that is very likely to apply to a large group of people. As a result, this advice may not always be very specific or tailored to your situation, but if I were in Dave’s position and addressing millions of listeners every week, I would have to make my advice general.

With that in mind, here are some of Dave’s advice on the TSP along with my comments.

Dave’s thoughts on investing in the TSP

He says you should be debt free except for your mortgage before investing in the TSP. He also encourages you to have an emergency fund for 3-6 months before you start investing.

My thoughts

I agree that you should have an emergency fund before considering long term investments. You don’t want to be forced to sell assets when the market subsides because something is happening in your personal life.

Ideally, everyone would be debt free and have plenty of time to prepare for retirement. For many people, if they waited to be debt free (other than their mortgage), they would have much less time to save and let their TSP grow. It often makes sense to attack debt while saving in the TSP. This would allow you to get your agency’s consistency while getting you to invest consistently.

However, credit card debt and other high-interest debt should be attacked ASAP.

Overall, there is no such thing as a perfect formula. Every persona needs to strike a balance between dealing with debt now and preparing for the future.

Dave’s Thoughts on TSP Contribution Allocations

On his website, he openly suggests that the Fed divide their TSP into either a mix of 80% C-Fund, 10% S-Fund and 10% I-Fund, or 60% C-Fund, 20% S-Fund and 20% I funds should invest.

My thoughts

Let me start by saying that there isn’t one bad TSP assignment, but there isn’t one or two assignments that make sense for everyone. Dave’s assignments are very aggressive and this can be useful for younger employees who have plenty of time ahead of retirement.

However, as people near retirement, their needs change. If someone invests aggressively through retirement, they run the risk that the market could fall dramatically just before or just after retirement. When this happens, it is very difficult for them to recover as they often have to start withdrawing from their TSP when the market is weak in order to maintain their retirement lifestyle. Most people want a more balanced strategy for bringing more stability into retirement.

Dave’s thoughts on transferring your TSP to an IRA

He suggests that federal employees should always move their TSP accounts to an individual retirement account (IRA) as soon as they are able to do so. Most federal agencies do this upon retirement.

My thoughts

An IRA is a great tool and has many great uses. But like a hammer, he’s not perfect for every job.

Here are some of the pros and cons of keeping your TSP


  • You are familiar with it and know the investment options.
  • The fund fees are low.


  • Limited investment and withdrawal options

Here are some of the pros and cons of moving your TSP to an IRA:


  • More investment options and payout flexibility.


  • Potentially higher fees if you can’t find affordable investment options.
  • More complex

Again, there is no clear answer. It just depends on what is most important to you and what you want to deal with in retirement.


Overall, I think Dave Ramsey has some great advice. The world would definitely be a better place if more people followed his advice, but as with all advice (including mine), it’s up to you to decide if it makes sense for you.

© 2021 Dallen Haws. All rights reserved. This article may not be reproduced in any reproduction without the express written consent of Dallen Haws.

Comments are closed.