Are TSP investors in panic mode?

After having one of their best-ever years in 2017, some newly-nervous Thrift Savings Plan investors are bailing out of stock-index funds and heading for what they consider the safe Treasury securities G fund. Half a dozen financial advisers in the D.C., Austin and Philadelphia areas say some of their clients panicked when the S& P 500 (C fund) dropped dramatically in January. The correction, about 10 percent, was long-overdue. Still when it happened, as is often the case, people get nervous.

Last year, the long-time laggard international stock I fund roared back with a 25.4 percent return. It’s full-year rate of return was 6.3 percent and from 2007 to 2017 it was 2.2 percent. Meaning (as of 2017) that people who continued to invest in it regularly during its down years bought low. It’s short-term returns are not so hot. For the last 12 months (through February of this year), its return rate dropped to 19.77 percent. Still great, but not like the 12-months of 2017. And its year-to-date return is -0.58.

The C fund (large cap stocks) and S fund (the rest of the U.S. stock market) were up big time in 2017, but have taken a hit since January. Year to date, the C fund is still up 17 percent but in February it was -3.69.

The S fund dipped last month with a -3.79 percent return. But for the last 12 months, it was up 12.31 percent and in 2017 its return was even higher.


Many financial planners urge clients investing for retirement to take the long-view. For many investors that is easier said than done. During the Great Recession hundreds of thousands of investors panicked when the stock market tanked. They sold (low as it turned out) their stock indexed C, S and I funds and fled to what they considered the safety of the treasury securities G-fund. While the G-fund was the only winner in February, its 0.21 percent is pretty low. Arthur Stein, a Washington area financial planner, warns his federal clients that relying solely on the G-fund for their retirement nest egg means it is likely to be eaten up, over time, by the combined effects of inflation and taxes on withdrawals. Listen to his talk on handling stock market corrections.

Investing in the TSP is important for workers under the old Civil Service Retirement System.

For employees and retirees under the Federal Employees Retirement System, active, smart investing in the TSP is critical. Because of its less generous federal annuity FERS employees are eligible for a 5 percent government match, which is huge. Those who invest at least 5 percent get it. Experts say that the TSP will provide 30 cents to 50 cents of every dollar that FERS retirees have to spend. That’s a lot. That’s why it’s important to max out your investments and not overreact to short-term ups and downs of the market. For example:

Compare these short-term (month of February TSP returns) with their 12-month returns.

Thrift Savings Plan — February 2018 Returns
Fund February Year-to-Date Last 12 Months
G fund 0.21% 0.41% 2.35%
F fund -0.96% -2.09% 0.70%
C fund -3.69% 1.82% 17.08%
S fund -3.79% -0.58% 12.31%
I fund -5.07% -0.32% 19.77%
L Income -0.70% 0.40% 5.15%
L 2020 -1.34% 0.47% 7.77%
L 2030 -2.48% 0.56% 11.31%
L 2040 -2.98% 0.57% 0.59%
L 2050 -3.41% 0.59% 14.41%

Nearly Useless Factoid

By Michael O’Connell

The name for the rock band Blue Oyster Cult originated in the poetry of the band’s manager, Sandy Pearlman. In the poetry, the Blue Oyster Cult was a group of aliens that were secretly guiding Earth’s history.

Source: SongFacts