Retirement & Financial Planning Report

September 22 is the deadline for using a special TSP loan authority that was enacted earlier this year as part of the “Cares Act” pandemic relief law, although several other authorities created under that law will continue through the calendar year.

The law increased the maximum for a general purpose loan from the TSP from $50,000 to $100,000 (or the full amount of the participant’s vested balance, if less), for loans taken out before the deadline for certain conditions related to the virus.

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In sum, those conditions are that if a participant, spouse or dependent has been diagnosed as infected, or “is experiencing adverse financial consequences” as a result of quarantine, furlough, reduction in work hours or being unable to work due to lack of child care.

Also under that law, those with a current loan who meet one of those standards may suspend payments through December 31; such requests can be made as late as November 30, although waiting that long would result in only a one-month suspension.

That law also allows financial hardship withdrawals to be taken through the end of the year of up to $100,000 for reasons related to the virus by those under age 59 1/2, without the standard 10 percent tax penalty on in-service withdrawals taken. Ordinary taxes still would be due but could be spread over three years, and those taking such withdrawals can repay them into the TSP—or another retirement savings plan—to negate that taxation.

Survey Examines Why Some Employees Forgo Agency Contributions
The TSP’s recently released participant survey showed that among FERS participants, 11 percent were not investing any of their own money and another 8 percent were investing less than the 5 percent needed to capture the maximum government match of another 4 percent.

TSP C Fund Reaches New Highs Despite Underlying Fundamentals
The S&P 500 index tracks 500 top publicly-traded American companies, represents about 80% of the U.S. equity market by value, and is tracked by the C Fund. It has broken out to new all-time highs in 2020 despite the economic downtrend that has occurred, but is now overbought in terms of the daily relative strength index (RSI), which historically increases the odds of a correction or consolidation in the weeks ahead.

TSP International Fund Continues to Lag
The TSP’s International Fund, or I Fund, tracks the MSCI EAFE index, which includes equities from foreign developed markets mainly in Europe and Japan. Over the past year, the S&P 500, which is the index that the C Fund tracks, has outperformed the MSCI EAFE index by nearly 13%.

2020 Federal Employees Handbook