Now Is a Good Time for FERS Employees to Review TSP Investment Rates

/in /by

This point of the year is a good time for FERS employees to make sure they won’t lose government contributions to their TSP accounts due to hitting the annual investment dollar limit too early. The cap this year is $20,500 (a combined limit for both traditional pre-tax TSP investing and after-tax Roth investing, for those making both types).

FERS investors should take care to structure their investments so that they can continue investing at least 5 percent of salary, the amount that produces the maximum government contribution, through every pay period of the year. Some employees invest at high rates early in the year in order to get money in the TSP sooner and take advantage of potential tax-advantaged growth for longer periods—that is, “front-loading” their investments. Especially those FERS employees who have been doing so might want to examine their situation around now. Click HERE to read more.

TSP Officials Say They’re Nearing ‘Normalcy’ After a Troublesome Recordkeeper Transition

/in /by

Wait times on the customer service number for the federal government’s 401(k)-style retirement savings plan are down from over two hours to 15 minutes on average.

Officials with the federal government’s 401(k)-style retirement savings plan said Tuesday that there is light at the end of the tunnel that is the Thrift Savings Plan’s troubled transition to a new recordkeeper.

Since June 1, when the TSP moved its recordkeeping services to a new provider, Accenture Federal Services, and updated its website to feature a more secure login process and a number of other changes and new features, participants have bemoaned difficulty setting up and logging into their accounts, finding account information and historical documents, and confirming their beneficiary choices, among other problems. Click HERE to read more.

Thrift Savings Plan (TSP) Definition, How It Works, Tax Rules

/in /by

The federal government offers a different option to its employees to save for retirement than private companies. The Thrift Savings Plan (TSP) is very similar to popular plans found in the private sector, allowing for pre-tax contributions, employer matches, and long-term earning potential in a variety of funds. But it has some unique options that can make it an attractive benefit for signing on to a government job.

Here’s a closer look at how TSPs work and what you need to know before opting to participate in one.
What is a Thrift Savings Plan (TSP)

A TSP is a retirement savings program for most people who work part-time or full-time for the federal government at an eligible pay status. More specifically, TSPs are available to:

• Federal Employees Retirement System (FERS) or Civil Service Retirement System (CSRS) employees
• Members of a uniformed service, either active duty or part of the Ready Reserve
• Civilians in some additional government service categories

• Like 401(k) and 403(b) plans offered to those who work in the private and nonprofit sectors, TSPs give you the ability to divert earnings into investments that can grow into a tax-deferred nest egg for retirement. Generally, eligible employees are automatically enrolled in a TSP with 5% of their salary allocated into an individual plan account. This is the minimum you’re required to contribute in order to receive a full match from your employer.

• “[Federal employees] are immediately vested into the TSP,” says Samuel Eberts, junior partner and financial advisor with Dugan Brown. “Even if they separate from service shortly after joining, they will be able to keep any contributions, most of the government match (if applicable) and any growth associated with the account. Additionally, military employees who are part of the blended retirement system (BRS) and FERS employees both receive matching contributions from the government.”

There are two types of TSPs that may be available to you: traditional TSPs and Roth TSPs.

• A traditional TSP uses pre-tax contributions from your salary and employer matching to fund the account. You don’t pay taxes on those investments and earnings until you begin to take distributions, usually after you reach retirement age.
• A Roth TSP contains post-tax contributions, which will not be taxable again when you withdraw that money. You may be able to participate in one or both types of TSPs. Follow link to read more.: https://bit.ly/3IOwsAj

Things to Consider Before Moving Money into TSP’s G Fund

/in /by

Many of the funds in the government’s 401(k)-style retirement savings program are seeing losses from market downturns, but the G Fund is growing.

Well it’s official. The G Fund is now the biggest amongst the five core TSP funds. That’s not a small feat as the C Fund – the next biggest fund – has more than $200 billion invested in it.

But, while we’re still waiting for the exact numbers from the most recent TSP Investment board meeting, based on market performance, the G Fund holds between $215-$220 billion.

So, what does this mean for you?

Why This Happened
There are two main reasons why the G Fund is now on top.

First, the other funds are struggling. The C, S, I and F funds have all lost money in 2022 while the G Fund has the inherent advantage of being guaranteed by the government. In other words, the G Fund can’t lose money while all the other funds have suffered losses. Therefore, just from market performance, the other funds’ sizes have wavered compared to the steady G Fund.

Second, people are jumping ship. The market volatility has got many people spooked and many are jumping out of the more aggressive stock funds – C, S, and I – in favor of the G Fund’s safety. So, the other funds are not only losing value from recent market performance but also from individual federal employees moving their money out of it.

But what most of those federal employees don’t realize is that right now may be one of the worst times to go to the G Fund.
Big Opportunities Right Now

When the market struggles, there is always good news and bad news. The bad news is that it is painful to watch account balances fall.
The good news is that this is an incredible opportunity to set yourself up for the future. Because when the market is down, you are able to invest at a huge discount. Think about it. The C Fund has lost about 20% since January 2022 which means that you can buy significantly more shares in the C Fund with the same TSP contribution as before.

While you are working, down markets are an incredibly powerful time to buy low so you can sell high later. If you go all into the G Fund right now, that is doing the exact opposite: buying high and selling low. Over time, this strategy could be detrimental to how much money you’ll have by retirement.

Nearing Retirement or Already Retired?
But what if you are close to retirement and you don’t have much more time to “buy low” by putting new money into your TSP?
For those approaching retirement or already retired, it is even more important to buy low and sell high, and you should develop an investment strategy to help you to do that for the rest of your life.

Citation: 6/11/2022 Government Executive By Dallen Haws

TSP FUNDS TUMBLE AGAIN IN JUNE

/in /by

The federal government’s 401(k)-style retirement savings plan continues to suffer from tumult in financial markets.
After a brief rebound in May, the federal government’s 401(k)-style retirement savings plan continued a descent last month that has lasted nearly the entirety of 2022.

The international stocks of the Thrift Savings Plan’s I Fund saw the worst performance in June, falling 8.21%. So far this year, the I Fund has lost 18.95% in value.

TSP portfolios tracking domestic corporations didn’t fare much better. The common stocks of the C Fund finished last month 6.55% in the red, bringing its 2022 performance down to 19.96% in the red. And the small- and mid-size businesses of the S Fund lost 7.95% in June. So far this year, the S Fund has fallen 27.92% in value.

The fixed income bonds in the F fund lost 1.94% last month. Since January, the fund has decreased 10.08%.

The G Fund, which is made up of government securities, was the only TSP fund to finish June in the black, gaining 0.29% last month. So far this year, the G Fund has gained 1.15% in value.

All of the TSP’s lifecycle (L) funds, which shift to more stable investments as participants get closer to retirement, posted negative returns last month. The L Income Fund, for people who have already begun making withdrawals, lost 1.60%; L 2025, 2.98%; L 2030, 4.37%; L 2035, 4.84%; L 2040, 5.29%; L 2045, 5.69%; L 2050, 6.07%; L 2055, 7.25%; L 2060, 7.25%; and L 2065, 7.25%.

Since January, the L Income Fund fell 4.84%; L 2025, 8.98%; L 2030, 12.88%; L 2035, 14.22%; L 2040, 15.49%; L 2045, 16.62%; L 2050, 17.66%; L 2055, 20.54%; L 2060, 20.55%; and L 2065, 20.55%.
Citation: 7/1/22 Government Executive Erich Wagner