Is your TSP portfolio too ‘safe?’

During the Great Recession of 2008-2009, tens of thousands of federal investors moved hundred of millions of dollars from the Thrift Savings Plan’s stock funds (C, S and I ) into the safety of the Treasury securities G fund. They did so because the G fund hardly budged while the stock and Lifecycle funds were taking a beating.

Many people decided to ride out the recession so they could miss the downside and return to the C, S and I stock funds when things got better. Eleven years later, some still haven’t returned. Many missed the bull market. The G fund is the go-to place even though, over time it under returns. Compared to most other TSP investment options it never has a really bad day, or a particularly good one.  In 2019, for example, the large cap stocks C fund returned more than 31%. The small caps S fund returned almost 28% and the international stock I fund returned more than 22%. The F fund return was 2.24% while the F fund bonds returned 8.6%.

The lure of the G fund is that it never has a loss. But many used it as a safe harbor to ride out the big hits the stock market was taking. And, if history is any guide, it will again. The easiest part is deciding when to bail out of the market, timing when it is at or near bottom. The tough part is deciding when the market is back and heading up, and missing out on the gains during that time.

Although the bull market is approaching its 11th anniversary many are still waiting for the right time. Although the markets took a huge nose-dive, the biggest in memory for many investors, the market started recovering in early March 2009.

Many experts say that having all or too much of your retirement nestegg in the G fund means running the risk that overtime inflation can erode the value of your account which may be necessary to provide one-third to one-half of your retirement income if you are under the Federal Employees Retirement System program with its diet cost of living adjustment inflation provision.

So what are the numbers? Check out this chart from the Federal Retirement Thrift Investment Board, which runs the TSP.  It shows actual returns from over a one-, three-, five- and 10-year period, as well as the actual returns since the TSP started:

Nearly Useless Factoid

By Amelia Brust

Familiar to viewers of Netflix’s “Derry Girls” and anyone who has attended an Irish wedding, 1,805 people set the Guinness World Record for the largest-ever dance of “Rock the Boat” in Salthill Promenade, Galway, on June 16. The event surpassed the previous record of 1,702 people participating in the dance to the American disco single, and was meant to support Ability West, a nonprofit that assists people with intellectual disabilities.

Source: The Irish Times

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THRIFT SAVINGS PLAN TICKER

Dec 02, 2020 Close Change YTD*
L Income 22.0966 0.0086 4.04%
L 2025 10.9727 0.0095 -
L 2030 37.9832 0.04 8.24%
L 2035 11.3094 0.0129 -
L 2040 42.4264 0.0524 9.51%
L 2045 11.5374 0.015 -
L 2050 25.0875 0.0347 10.56%
L 2055 12.0009 0.0208 -
L 2060 12.0010 0.0208 -
L 2065 12.0011 0.0208 -
G Fund 16.4972 0.0004 0.89%
F Fund 21.0772 -0.0166 7.35%
C Fund 54.5530 0.1026 13.93%
S Fund 69.4698 -0.1311 22.95%
I Fund 34.2669 0.1097 3.37%
Closing price updated at approx 6pm ET each business day. More at tsp.gov
* YTD data is updated on the last day of the month.