The TSP continues to experience net outflows despite a rising balance. Image: dajingjing/Shutterstock.com
By: FEDweek StaffTotal account balances in the TSP neared the $900 billion mark through May, hitting a record $898 billion, up from $845 billion at the start of the year, data presented at the monthly meeting of the TSP governing board show.
Those gains were driven by positive returns in the stock funds over the first five months of the year—which have generally continued in June, meaning that the total may already have crossed that threshold.
They came despite the TSP continuing to experience a net outflow, with $320 million more taken out during that time in withdrawals and loans than was added in new investments and loan repayments.
The average account balance for CSRS participants—the large majority of them retirees—stood at more than $208,000 as of the end of May, while the average for FERS participants was above $184,000. Each is up by about $10,000 year-to-date.
The TSP meanwhile said that a new 2070 target date lifecycle L fund will launch July 26, and will be the default investment fund for new enrollees born after 2004. For the immediate future, that mainly will mean new military personnel, since federal agencies hire relatively few employees that young. The fund is to have the same investment profile—all but 1 percent in the three stock-based funds—as the current 2055, 2060 and 2065 funds.
The TSP earlier had announced that the fund would launch in July but had not set a date. Also as previously announced, next year the 2025 fund will be merged with the Income fund when their investment profiles match, and a 2075 fund will be launched.
The L Funds are the default funds for automatically enrolled participants, and many investors go all in on a date fund they associate with their anticipated retirement date. However, that’s not always the best approach since many retirees don’t begin drawing down their TSP until much later into their retirement, and so miss out on potential gains since the L Funds become ultra conservative – almost entirely in the G Fund at the actual target date.
The L Funds are apportioned among the following TSP core funds, with decreasing risk as the target date approaches:
G Fund (Government Securities Investment Fund):
This fund invests in short-term U.S. Treasury securities that are specially issued to the TSP. It aims to offer a stable return with no risk of loss, although it carries inflationary risk in that principal diminishes in purchasing power over time – so even you your $1,000 stays the same or a little more, it’s still worth less than $1,000 today.
F Fund (Fixed Income Index Investment Fund):
The F Fund tracks the Bloomberg U.S. Aggregate Bond Index. It includes a wide range of bonds, such as U.S. government, corporate, and mortgage-backed securities, providing moderate potential returns with moderate risk.
C Fund (Common Stock Index Investment Fund):
This fund tracks the performance of the S&P 500 Index, which includes stocks of 500 large to medium-sized U.S. companies. It offers potential for higher returns but comes with higher risk.
S Fund (Small Capitalization Stock Index Investment Fund):
The S Fund tracks the Dow Jones U.S. Completion Total Stock Market Index. This index represents the performance of small to medium-sized U.S. companies that are not included in the S&P 500, with higher potential returns and higher risk compared to the C Fund.
I Fund (International Stock Index Investment Fund):
The I Fund was recently updated to track the MSCI All Country World Investable Market Index ex USA ex China ex Hong Kong (MSCI ACWI IMI ex USA ex China ex Hong Kong) Index, rather than the MSCI Europe, Australasia and Far East (MSCI EAFE) Index, the move was made in order to capture a wider swath of international, including emerging markets. Political controversy surrounded plans to include Chinese companies in the mix and a compromise was finally reached with the ex China ex Hong Kong index.
Shutdown Meter Ticking Up a Bit
Judge Backs Suit against Firings of Probationers, but Won’t Order Reinstatements
Focus Turns to Senate on Effort to Block Trump Order against Unions
TSP Adds Detail to Upcoming Roth Conversion Feature
White House to Issue Rules on RIF, Disciplinary Policy Changes
Hill Dems Question OPM on PSHB Program After IG Slams Readiness
See also,
How Do Age and Years of Service Impact My Federal Retirement
The Best Ages for Federal Employees to Retire
