What if he, or she, wins? Is your TSP safe?

Senior Correspondent Mike Causey asks: What happens to federal workers' Thrift Savings Plan accounts if you-know-who-wins the election?

Going out on a limb, I am predicting that Libertarian Gary Johnson and Green Party candidate Jill Stein will not be our next president. Nor will former CIA officer Evan McMullin, the only former career civil servant in the race, do well outside of his home state of Utah.

I also believe the stock market will either go up, or down, depending on whether Democrat Hillary Clinton or Republican Donald Trump gets the most electoral votes. And that if it goes up it will eventually go down, and if it goes down it will eventually recover.

Also that whoever wins it probably won’t be as bad as we thought and that the winner won’t do half of what he/she threatened or promised.

Despite this sage (???) advice, lots of feds are nervous. Not so much about their jobs, but about the future of the country they work for. And their Thrift Savings Plan accounts. About 90 percent of feds still on-the-job will, when they retire, get anywhere from one-third to one-half of their retirement cash from their TSP investments. Their Social Security and FERS federal annuity won’t be as large as the indexed-to-inflation lifetime annuities earned by workers and retirees who are under the CSRS system. So the TSP is vital to most current working feds. And they get nervous.

During the Great Recession, hundreds of thousands of active and retired feds pulled money out of their stock-indexed C, S and I funds (and associated Lifecycle funds) and moved it to the “safety” of the Treasury securities based G fund. Many wound up selling low. And when (and if) they returned to the stock market funds in following years, they bought high. Those who didn’t return missed out (and continued to miss out) on the surge stock prices.

Financial planner Arthur Stein (based in Bethesda, Maryland) has lots of federal worker/retiree clients, including two who became TSP millionaires. He’s been hearing from lots of people, and he leads off his pre-election blog by asking what impact, if any, the election will have on the stock market? One client asked if he should be preparing for a Trump victory that would/might cause the stock market to fall “dramatically.”

Short answer, Stein says, that it’s not an easy question to answer: On Nov. 4, he wrote “even with the recent pro-Trump surge, it still appears unlikely that he will win.”

“The markets hate uncertainty and a Trump presidency seems more uncertain than a Clinton presidency. Stock markets often anticipate  events and prices fall in advance” as they have over the last two weeks. When the event happens, prices may rise. He said, “If Trump is elected and the market declines as a result, the decline may be short and temporary” as happened before and after the “Brexit” vote to take the U.K. out of the European Union, which illustrated that “doing nothing was a good strategy. If a decline were substantial, how would you know when to reinvest? After a 5 percent drop? A 10 percent or 20 percent drop.” Going back into the market is one of the toughest decision investors have to make. Some never return.

Stein says the market is overdue for a 20 percent “correction” so that if Trump is elected and the markets drop “a Trump victory could be the catalyst for substantial decline that was going to happen at some point.”

To read the full report, click here.

Nearly Useless Factoid

By Michael O’Connell

Growing up, President Barack Obama was into Spider-Man and Conan the Barbarian comic books.

Source: The Daily Caller

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