TSP in a nosedive?
What does the federal Thrift Savings Plan have in common with the Washington Nationals baseball team? Short answer: Neither is performing at their 2017 pace.
What does the stock market—specifically your Thrift Savings Plan account—have in common with the Washington Nationals baseball team?
Answer: Both have had a rough start this year. Neither is performing at their hot 2017 levels which had many long-time fans (who remember the hapless Washington Senators) thinking world series thoughts! What happened? What’s happening and what’s going to happen the rest of the year to the TSP? And the Senators. I mean, Nationals?
Baseball experts have several theories.
As to the TSP, we checked in with Washington area financial planner Arthur Stein .
For feds under the FERS retirement plan, their TSP investments will likely supply anywhere from one-third to one half of all the money they have to spend in retirement. That’s a lot. Many of Stein’s clients are working or retired feds. Several of them are TSP millionaires who invested for decades—in good times and bad—into the TSP’s stock-index C and S funds.
“So the higher volatility and slightly negative returns during the first quarter of 2018 are quite different from 2017,” Stein said. “What changed?”
“In my opinion, no one really knows. However, some issues that may be affecting the markets include:
• The beginning of a trade war;
• Slightly higher interest rates and the possibility of higher rates in the future; and
• Political turmoil in the US.
“Looking for some positive trends? Well,
• The world economy continues to grow;
• The US tax cut and continued economic growth could stimulate corporate earnings this year; and
• Inflation and interest rates are still low.
“Does this tell us anything about future returns? I don’t think so. One, five and ten year average returns are excellent but we are overdue for a major stock market decline. ‘Major’ meaning 20 percent or more. On average, such large declines occurred every 3.5 years. The last to occur was 2008 and 2009. So we are nine years overdue. It could happen soon or much later but TSP investors need to be aware of the risk.”
Art Stein will be my guest on today’s Your Turn radio show (10a.m. EDT). Listen if you can. It will also be archived on our home page so you can listen anytime. If you have questions for him email them to me before air time: mcausey@federalnewsradio.com
Nearly Useless Factoid
The Washington Nationals field is a three-way blend of Kentucky Bluegrass. Varieties are Princeton 105, Brilliant and Midnight Star.
Source: Nationals.com
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Mike Causey
Mike Causey is senior correspondent for Federal News Network and writes his daily Federal Report column on federal employees’ pay, benefits and retirement.
Follow @mcauseyWFED
