Do you participate in the thrift savings plan (TSP)? It’s a powerful savings vehicle for government employees. You can contribute up to $19,000 to the TSP in 2019. That figure increases to $25,000 if you’re 50 or older.1
You can allocate those contributions, plus any matching contributions from your agency, to a variety of funds. Some funds have more risk exposure than others. Similarly, some funds may have more growth potential than others. You can create your own allocation, so your portfolio is aligned with your goals and risk tolerance.
Regardless of which funds you select, all growth in the TSP is tax deferred. That means you don’t pay taxes on your growth as long as it stays in the account. Rather, you pay taxes on your future distributions. Tax-deferral could help your assets compound faster than they would in a taxable account.
Below is information on each TSP investment fund, along with their YTD performance through the first half of 2019. If you haven’t reviewed your allocation recently, now may be the time to do so. A TSP review can help you keep your strategy on-track and make sure that your portfolio is aligned with your objectives and risk tolerance.
There are two types of funds in the TSP: individual and lifestyle. Individual funds focus on specific asset classes. You can combine the individual funds in any manner you wish to build your portfolio. Below are descriptions and performance for the five individual Funds:
The G Fund aims to achieve a return that exceeds inflation while also avoiding risk and volatility. It does this by investing primarily in short-term Treasury securities that are exclusive to the TSP.
2019 YTD Performance – 1.28%2
The F Fund’s goal is to match the return of the Bloomberg Barclays U.S. Aggregate Bond Index, which represents the broad U.S. bond market.
2019 YTD Performance – 6.11%
The C Fund’s goal is to match the performance of the S&P 500, an index that represents 500 large and midsize U.S. companies. The fund’s earnings consist of dividends and the gains or losses of stocks.
2019 YTD Performance – 18.53%
The S Fund aims to match the performance of the Dow Jones U.S. Completion Total Stock Market Index, which represents stocks of companies that are not included in the S&P 500. These companies usually tend to be smaller than those in the S&P 500 and may have more volatile performance.
2019 YTD Performance – 19.48%
The I Fund’s objective is to match the performance of the MSCI EAFE Index, which represents companies in Europe, Australasia and the Far East.
2019 YTD Performance – 14.42%
The TSP also offers life cycle funds. These funds are designed to meet the unique needs and risk tolerance of those on different time horizons. The funds are reallocated over time as you get closer to your retirement date.
For instance, the L 2020 fund is for those who are targeting retirement in or near 2020. It currently has a conservative allocation because retirement is right around the corner. The L 2050 fund, on the other hand, is designed for those who have a longer time horizon, so it may have a more aggressive allocation.
The lifecycle funds performed as follows in 2018:
L Income – 4.70%
L 2020 – 6.08%
L 2030 – 11.03%
L 2040 – 12.96%
L 2050 – 14.60%
Ready to review your TSP? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your goals and risk tolerance and develop the appropriate strategy. Let’s connect soon and start the conversation.
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