Are Your TSP Investments Right for You?

Are Your TSP Investments Right for You?

 

The Thrift Savings Plan (TSP) may be one of the most efficient retirements plans ever created. Open to all federal government employees, this program allows employees to defer a portion of their earnings into a retirement plan annually. However, many still don’t know which funds are appropriate for their financial goals. Federal Educators share advice on TSP investments so you can decide which one is right for you.

 

The TSP is roughly equivalent to the 401(k) plans that companies offer their employees. It offers employees five core mutual funds, four of which are diversified index funds, to invest in with their earnings. Each of the four index funds – F, C, S, and I – focuses on a different asset or market segment like corporate bonds or international equities. The fifth core fund is the “G Fund.” It consists of very low-risk, low-yield government bonds that guarantee principal protection for conservative investors. Blackrock Capital Advisers manages all these funds that are only available to TSP participants.

 

The F Fund is the next step up on the risk/reward chart. It invests in a variety of bonds and securities. The C Fund is noted as the most conservative stock fund available in the TSP, though it can experience greater volatility. It invests in the 500 large and mid-cap companies of the S&P 500. The S Fund focuses on the smaller companies outside of the S&P 500 and can experience high volatility but also greater growth. Lastly, the I fund invests in large companies around the world and produces more risk.

 

Each of these funds, except the G Fund, is wholly invested in its specific index. Each fund’s share price is calculated daily and reflects investment returns sans administrative and trading fees. Oppositely, the G Fund is not invested in an index, only a special non-marketable treasury security that is specific to the U.S. government. This is the only TSP fund that guarantees a return of the investor’s principal. All money contributed is placed in this low-risk fund by default, unless the participant specifies otherwise.

 

For more comprehensive retirement planning, the Federal Educators team can provide your family with resources and tools tailored to your journey. Call the Tampa office at (813) 755-7037 or request a free benefits analysis today.