TSP, tax reform, your Plan B

Republicans in the House and Senate say whichever version of tax reform becomes law, it will mean happy days will be here again. The economy will flourish and thousands of overseas jobs will return to the heartland.

Democrats in the House and Senate use air quotes and roll their eyes when they discuss the GOP tax “reform plan,” which, they say, will benefit the rich and shaft middle-income Americans. And put us deeper in debt.

The U.S. stock market is up almost 25 percent (according to Wilshire Associates) since the 2016 election, while unemployment is at a 17-year low, despite a much larger number of job seekers and automation inroads into work once performed by human beings. Consider your local supermarket where, in some cases, self-checkout machines outnumber human clerks. Many feel that more jobs aren’t the same as good jobs.

All five of the Thrift Savings Plan’s primary funds are up over the last 12 months. The Treasury securities G fund is up 2.33 percent; the bond F fund is up 3.49 percent (though down 0.11 in November); the big-cap C fund is up 22.8 percent; the small-cap S fund is up 19.80 percent and the international stocks I fund is up 27.9 percent.

For the majority of federal workers who are under the FERS retirement plan, the TSP will supply one-third to as much as one-half of all the money they have to spend in retirement. The TSP is a luxury for CSRS workers, and an absolute must for FERS employees.

That means lots of things, including that the shares you own are worth more, while at the same time the price you pay for future purchases keeps going up. Until they don’t. Which then means that the shares you own will be worth less, but they will also be on sale for new purchases.

Many experts say the market is long overdue for a correction of 20-to-30 percent. Last time that happened, during the Great Recession, hundreds of thousands of feds and retirees left the C, S and I funds and moved their money into what they felt was the safety of the G fund. Most of them wound up buying high, selling low, then — if they stayed out of stocks — missing the major recovery. And buying shares at what, for several years, were bargain-basement prices.

The headline on yesterday’s Robert J. Samuelson column in the Washington Post says a lot: “Beware an economic boom. Really.” Samuelson said, “lowering tax rates is good; borrowing to do so, as opposed to closing other tax breaks is bad.” While we “don’t fully understand the effects of budget deficits on the business cycle,” he said history “suggests the bigger the boom, the bigger the bust.”

Whatever happens, or doesn’t happen, having a Plan B (whether duck and cover, retreat or stay the course) is not a bad idea. So what’s your strategy? Let me know: mcausey@federalnewsradio.com.

Nearly Useless Factoid

By Michael O’Connell

The pistachio is a member of the cashew family.

Source: Wikipedia