TSP investors: Brace for impact!

During the Great Recession of 2008-2009, the S&P 500 index lost 50% of its value. The C fund of the federal Thrift Savings Plan tracks the S&P 500.

The Great Recession (which was a brief 17 months as recessions go) followed the boom years of 2002 through 2007. What goes up also goes down. At least so far.

All of which is why federal investors, who have grown more sophisticated over the years, need to be careful. How they behave prudently or panic during a downturn can determine how much they will have in their retirement nest egg when they leave government. The number of TSP millionaires has gone over 95,000 at last count. Most of them are long-time investors who continued to buy shares in the TSP’s three stock index funds (C, S and I) during the recession, even as millions of other investors fled to the “safety” of the treasury securities G fund.

So what’s an investor do? Plan ahead and don’t panic is what most of the pros say. But knowing what you should do during the next stock market crash and doing it are two very different things. Financial planner Arthur Stein has a number of clients who are TSP millionaires. Most aren’t but hope to be. He says that feds are now investing more in the C fund than the low-yield G fund. And that’s a good thing. Up to a point! Which is what we will be talking about today at 10 a.m. on Your Turn. It will be streaming here or on the radio at 1500 AM in the Baltimore-Washington D.C. area. He is going to talk us through the next — and long overdue — market downturn. If you have questions for them, shoot them to me at mcausey@federalnewsnetwork.com before showtime.

Meantime, he’s written this preview of the show today and what he’ll be talking about.

Are TSP Participants Chasing Returns?

By Arthur Stein, CFP®

TSP investors have become more aggressive in their investment allocations. They now invest more in the U.S. stock funds than at any previous time. In fact, allocations to the C Fund (an S&P 500 stock index fund) are now greater than the G Fund (short-term government bonds).

Source: FRTIB, June 2021 Performance Review.

In short, participants are investing a higher percentage in the U.S. stock funds(C and S) and a lower percentage in the bond funds (F and G) than at anytime in the past. The I Fund (stocks of foreign companies) is an exception; it is less popular than in 2011.

Note that the L Fund allocation does not break out the L Fund investments in the individual, traditional, funds.

One reason for the increasing popularity of the U.S. stock funds is the performance difference over the last 15 years. During that time, U.S. stocks outperformed bonds by significant amounts.

Nearly Useless Factoid

By Alazar Moges

At 9,032 pounds, the largest recorded rubber band ball was made by Joel Waul of Lauderhill, Florida. It was measured in 2008 with 700,000 rubber bands used. Joel started creating his rubber band ball in 2004.

Source: Guinness World Records

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Jan 28, 2022 Close Change YTD*
L Income 23.0673 0.0855 5.42%
L 2025 11.8470 0.0796 9.75%
L 2030 41.5863 0.3882 12.37%
L 2035 12.4642 0.1275 13.43%
L 2040 47.0750 0.5233 14.51%
L 2045 12.8695 0.1529 15.40%
L 2050 28.1465 0.3559 16.34%
L 2055 13.7831 0.2098 19.90%
L 2060 13.7829 0.2099 19.90%
L 2065 13.7827 0.2098 19.90%
G Fund 16.7568 0.0008 1.38%
F Fund 20.4569 0.0149 -1.46%
C Fund 66.9574 1.599 28.68%
S Fund 72.3190 1.7203 12.45%
I Fund 37.1944 -0.0283 11.45%
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.