Most of the money federal-postal and military personnel have in their retirement nestegg is in the fund that ranks tenth in a field of 10 in its rate of return.

Last year the G-fund (which has 34 percent of all TSP investment dollars) returned 4.87 percent. It was bested by the C-fund, 5.54 percent; the F-fund, 7.09 percent; the S-fund, 5.49 percent; and the I-fund, which returned 11.43 percent.

The super-safe, never has a bad day G-fund (invested in special guaranteed U.S. Treasury securities) also trailed all of the Lifecycle funds where the rate of return ranged from 5.56 percent in the most conservative L income fund to 7.36 percent in the L 2040 fund which has the biggest mix of stocks.

In terms of where they have their TSP money, investors had 34 percent in the G-fund, 32 percent in the C-fund (which tracks the S&P 500 fund); 11 percent in the rock-and-roll international stock market I-fund; 7 percent in the small-cap stock S-fund and 5 percent in the bond index F-fund.

Among the target date L funds workers and retirees had 4 percent in the L-2020 fund, 2 percent each in the L-2010, L-2030, and L-2040 Funds and 1 percent in the L Income Fund.

The numbers (2020, 2030, etc.) are the target date you select as the time when you will begin withdrawing money from your TSP account. Because of their inflation-indexed annuities, many federal retirees don’t have to tap into their TSP accounts until many years after they have retired.

At the end of last year investors in the TSP had accounts worth $232.56 billion. That included $78 billion in the G-fund, $74.3 billion in the I-fund and $16.7 in the S-fund.

Certified financial planner Arthur Stein (astein@finsvcs.com) thinks a lot of people are making mistakes. He thinks too many people are actually taking a risk when they play it “safe” by investing heavily in the G-fund.

Stein says that over the 10-year period ending in 2006, the S-fund (least popular of the index funds with investors) was the leader of the pack. Yet investors either played it safe by putting more in the G-fund or were more “aggressive” by making the I-fund their second favorite place to invest.

Many experts believe that investors should assume they will live a long time after retirement. For federal workers under the CSRS system (with inflation-indexed pensions) Stein says the concern is not running out of money. “They need to worry about the loss of purchasing power,” he said, if the are in low-yield investments and their expenses increase faster than the increase in their annuities.

“FERS employees (the majority of people now working for Uncle Sam) have the most difficult situation,” he said. Because they have smaller civil service retirement benefits, and get diet-COLAs which don’t kick in until age 62 “they have serious financial planning issues.”

Other tips:

• Get long term care insurance. It can vastly improve the quality of care you receive and the qualitiy of life of yourself and your caregivers.
• Pay off credit card debt and don’t rely on home equity loans. Credit card fees are obscene and credit is likely to get tighter in coming months. You may be asked to pay back more, faster (when you had planned on borrowing more), and standards for qualifying for credit may be raised.
• Have a cash emergency fund of three, six or preferable 12 months to pay bills, just in case.

Stein was our guest earlier this week on our Your Turn show. If you missed it or want to hear it again you can click here.

The Nearly Useless Factoid

How big is your flake? According to the Guinness Book of World Records, the largest snowflake in recorded history was reported at Fort Keogh, Montana, on January 28, 1887. The snowflake was reportedly 15 inches wide and 8 inches thick. The flakefinder described the big, fluffy wonders as “larger than milk pans.” Of course, that just made us wonder what the heck milk pans are.

To reach me: mcausey@federalnewsradio.com

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