A critical shift has occurred in the Thrift Savings Plan (TSP), signaling a changing financial landscape for federal employees. As reported by FEDweek and corroborated by recent data from the Federal Retirement Thrift Investment Board (FRTIB), the TSP’s cash flow has turned negative. For the first time in recent memory, the total money flowing out of the plan via withdrawals and loans is outpacing the new money flowing in from contributions and loan repayments.
This isn’t just an administrative statistic; it is a barometer of the financial pressure facing the federal workforce and a signal of the massive demographic shift known as the “Great Federal Exit.”
📉 The Data: More Money Out Than In
The “negative cash flow” phenomenon is driven by two colliding forces: a surge in retirements and increasing financial economic strain.
Sound Data: The 2025 Trend According to recent participant activity reports from the FRTIB, the net flow of funds has dipped into negative territory multiple times in 2025.
- Negative Net Flow: In early 2025, data showed a net flow of approximately -$656 million year-to-date in certain months. This means over half a billion dollars more left the plan than entered it.
- The Retirement Wave: The primary driver is the sheer volume of post-separation withdrawals. As the “deferred resignation” wave hits and baby boomers retire, billions are moving out of the TSP to pay for living expenses or transferring to private IRAs.
- Economic Stress: There has also been a notable uptick in General Purpose Loans and Hardship Withdrawals. In 2025, hardship withdrawal transactions have remained elevated, indicating that active employees are increasingly raiding their retirement nest eggs to cover immediate bills—a trend likely exacerbated by recent government shutdowns and inflation.
⚠️ What This Means for You
The shift to negative cash flow highlights a critical transition that every federal employee must make: moving from an “accumulation mindset” (saving money) to a “distribution mindset” (spending money safely).
1. The Loan Trap: With loan disbursements rising, many employees are borrowing from their future to pay for their present. While a TSP loan has a low interest rate, the real cost is the lost compound growth. If you borrow $50,000 during a market rally, you miss out on gains that can never be recovered.
2. The Distribution Risk: For retirees, the surge in outflows suggests many are taking lump sums or unplanned withdrawals. Without a strategy, withdrawing too much too soon—especially during market volatility—can deplete your nest egg years before you run out of life.
3. The “Bleed” to IRAs: A significant portion of the outflows comes from retirees transferring funds to private IRAs. While this offers more investment choices, it often comes with significantly higher fees than the TSP’s ultra-low expense ratios. Leaving the low-cost safety of the TSP without a clear value-add strategy is a transfer of wealth from you to a financial firm.
🛡️ Stop the Leak: Strategic Planning with Experts
Whether you are an active employee tempted by a loan or a retiree planning your withdrawals, you need a strategy that protects your long-term security.
This is where Internal Benefit Advisors provides essential guidance. We help you reverse the negative trend in your own account.
Here is how we help you manage your cash flow:
- Loan Alternative Analysis: Before you tap your TSP for a loan, we help you explore other liquidity options that don’t cannibalize your retirement growth.
- Sustainable Withdrawal Rates: For retirees, we calculate a safe withdrawal rate based on your unique spending needs and pension income, ensuring you don’t become part of the statistic of those who outlive their savings.
- TSP vs. IRA Assessment: We provide an unbiased comparison of keeping your money in the TSP versus moving it. If you move it, it should be for a specific strategic reason (like Roth conversions or specific tax planning), not just because you retired.
- “Hardship” Recovery: If you took a hardship withdrawal during the shutdown, we help you structure a “catch-up” contribution plan to refill your bucket before retirement.
The TSP’s cash flow may be negative, but yours doesn’t have to be.
Take the definitive step to protect your nest egg. Contact Internal Benefit Advisors today for a comprehensive TSP review.
References
- FEDweek. “TSP Cash Flow Turns Negative as Withdrawals, Loans Outpace New Investments.”
- Federal Retirement Thrift Investment Board (FRTIB). Monthly Participant Activity Reports (2025).
- Federal Retirement Thrift Investment Board (FRTIB). Thrift Savings Fund Statistics.
- Internal Benefit Advisors. Retrieved from https://internalbenefitadvisors.com
