Managing a retirement account can be a challenge which is why many people just let it glide along its own path. For US government employees with a TSP (Thrift Savings Plan) the challenge can be even greater.
The individual funds of the retirement account, Thrift Savings Plan, or TSP as they call it, are not traded on any public stock market, which makes it difficult for anyone to know what is going on or develop a strategy to track and measure returns outside of what the government bureaucracy tells you.
While the federal government makes it possible to have a good retirement plan, they do not make it easy to manage. But there is a solution.
The answer is to use an investment program designed to manage a retirement account that lets you emulate the TSP and give you sound advice in just 20 minutes a week, or even 20 minutes a month. In this way you can be on a course of safe profitable investing so when you’re ready to retire you actually have enough money to support yourself and your family. And you won’t have to worry about those days when the markets tank because you will know what to do early on to protect your money!
Part of the solution involves understanding the types of funds are in the TSP and the government trading rules.
The funds are:
The G Fund of US Government bonds is ultra conservative, basically matching inflation so the value of the money remains constant with inflation. The annual return goes up and down to match inflation. An investment in the G Fund means your retirement account will not really grow. By default the government puts your money in the G Fund.
The F Fund of various bonds produces greater results than the G Fund and has produced decent gains even when inflation was extremely low, as in recent years, and has not had any years of negative gain (loss) according to the April 2013 10 year summary report. An investment in the F fund means your retirement money will grow slightly.
The C, S, I Funds all emulate different major market indexes and so represent the respective markets as a whole and not any particular segments (i.e. consumer goods or energy) or individual stocks. This makes these funds more volatile and they can swing between major gains to major losses – as the annual report clearly illustrates. The S Fund almost always produces greater gains than the C Fund.
Trading Rule
The key fact to be aware of regarding trading, or Transfers as TSP calls them, is the rules state that only two (2) trades may be made each month from and to any of the funds. Any additional trades may only be made into the G Fund.
A safe retirement investing program that offers the ability to emulate the TSP funds and produce a safe profitable investing strategy will go a long way in producing the retirement income a person needs to live on in a lifestyle they desire.
My analysis of the various fund returns, as reported by the TSP administrators, indicates:
- There is rarely a reason to invest in the G Fund as the F Fund surpasses it during most years. The G fund is only slightly better than putting one’s money under the mattress.
- Regular payroll deposits should be made into the F Fund and then re-distributed in a future month.
- Strategies based on where to put your money, which TSP fund, can produce better returns than just leaving the money in one fund forever or even dividing your money amongst the different funds and leaving it so invested forever.
The key for US government employees is not only to participate in the TSP but to actively setup their account, review it either weekly or once a month and develop a strategy that will provide for the greatest growth with a risk level that your can accept.