TSP and the stock market: Is the honeymoon over?

After basking in the longest bull market in stock market history, many people with optional retirement accounts are wondering if unhappy days are here again.

Unless you have a cash stash, gold bars in the basement or are counting on your collection of still-in-the-box G.I. Joes to finance your golden years, odds are some or all of your optional retirement nest egg is in the stock market. Last month the number of federal workers and retirees with $1 million or more in their Thrift Savings Plan accounts hit 34,128.  Most did it the old-fashioned way by investing, on average, for 29 years primarily in the stock-indexed C and S funds.

Most of the TSP millionaires stuck with stocks during the Great Recession, while a majority of investors moved into the super-safe treasury securities G fund.  Many of them remain in the G fund and missed the great stock market recovery since 2009.  But that was then, this is now.

Most professionals and experts have been saying, some for years, that a major stock market correction of 20 percent or more is coming. They just don’t know when or how long it will last, which is a problem.

Paul Voelcker, former chairman of the Federal Reserve Board, said most stock market pundits are correct about half the time. How do you like those odds?  With the Powerball lottery that’s a good track record but with your retirement account, not so much.

Younger and mid-career feds can afford to ride out the good times and bad times of the market.  When it is down, as it was during the Great Recession, they can continue to buy stocks knowing and hoping they are on sale and their value will rise.  And it did.

But for Federal Employees Retirement System participants who are just a few years from retirement the “safety” of the G fund looks good. Even though financial planners like Arthur Stein argue that over a long time in retirement the low-returns of the G fund can be eaten away by inflation.  Feds who have or will retire under the Civil Service Retirement System are in better shape. They will get larger annuities than their FERS counterparts and their January cost of living adjustments are fully indexed to inflation.  FERS retirees get diet COLAs.

So have you been waiting for the next market downturn? Is this it? What’s your plan and what would you tell fellow feds? mcausey@federalnewsnetwork.com

Nearly Useless Factoid

By Amelia Brust

It takes 5,000 cows producing 11 million gallons of milk to make the 10 million pounds of cheddar cheese that are used in Cheetos seasoning — or, roughly 2,200 gallons of milk per cow.

Source: Thrillist

Copyright © 2024 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.