TSP Funds and Stocks Struggle in October

TSP Funds and Stocks Struggle in October 

This year has not been friendly to the stock market and federal employees and federal retirees are feeling the pinch. In fact, TSP funds took a brutal hit this year, showing just how poorly the stock market is doing. This last quarter was the worst for the stock market since 2011.

In recent years, the worst representation for TSP Funds were in October of 2008 when the C Fund dropped 17 percent and the S and I funds dropped a staggering 21 percent each. So far this month, the S Fund has a return of -5.98 percent, with a decline of 5.24 percent this year. The I fund fares slightly better with a decline of 4.33 percent this year.

While the G fund is the safest option for federal employees and has the highest monthly increase (.18 percent), all of the TSP funds are down for the month and for year-to-date.

This decline is in spite of a recent influx of some $2.3 billion to the G fund and $219 million to the F fund during the month of August. These new investments took a hit when investors withdrew some $986 million from the S fund, $432 million from the C fund and $450 million from the I fund. The average FERS TSP sits at close to $114,380, while investors in the CSRS TSP seem to fair a little better with an average of $115.710.

Automatic Enrollment Starts

In September, new federal employees were automatically enrolled in a Lifecycle fund (L Fund), a riskier alternative to the G fund. New employees have the option to switch to a G fund, but must actively select the investment option. Currently, some 36 percent of all federal TSP funds consist of the G fund. Currently, the L fund only makes up about 17 percent of all TSP investments. Automatically enrolling new employees into the alternative program could help spread investments over a broader range of options.

Many federal employees choose the G fund because it is the only TSP fund insured by the government. Despite the benefit of security, it generally sees lower rates of return than the other funds, which, while more volatile offer the potential for higher returns. According to TSP data, the G fund has a 10-year average of about 3.19 percent, while the F fund has a 10-year average of 4.89 percent. The C and S fund have even high 10-year return averages with 7.72 percent and 9.44 percent respectively.

TSP Accounts Decreasing

The number of TSP accounts are dropping as federal employees are opting for other alternatives (including traditional and Roth IRAs) to avoid low stock prices. While the number of Roth accounts increased by 2.3 percent in August and September, the number of TSP investments dropped by about $13 billion.

While the L fund sits at a -.51 percent for the month, year to date averages are .31 percent and 1.45 percent over the last 12 months. This new change is part of the TSP management team’s plan to help reduce the number of investments they lose when federal employees retire. Many federal employees opt to transfer their investments to IRAs because they offer more security.