What Should You Do When the Thrift Saving Plan Tanks?
The Stock Market’s fluctuations have left everyone in shock. Lots of rumors and predictions around the world are spreading, but one thing about these market predictions is sure that the boom and it will bust, but no one knows when it will happen.
We can guarantee that most of the investors believe that taking your stocks to banks and selling them is the easiest part these days.
This is a bit trickier and a lot more complicated and unpredictable when the market will rise. Most professionals say it can’t be done.
Most of the professionals and experts have been guessing that the past 11 years of a booming stock market wouldn’t last long. They warned everyone that the stock market goes through a significant correction, regularly reporting a 20% or more drop in the stock. The latest stock reports from March 2009 to March 2020 shocked everyone. And the way the market was affected by the virus that came from China, certainly wasn’t expected.
The question remains in our hearts: What will happen next? Do you think the dropping stock market is an opportunity to buy stocks? Are all stocks on sale? Is this something like a Great Recession, when stocks dropped and will rise at a recorded pace? Or this is something different than what you’re thinking?
Most of the working and retired federal workers and the postal workers have a 401k plan through the federal Thrift Savings Plan. The workers working under the Civil Service Retirement System enjoy more generous indexed-to-inflation annuity for life, and for them, the Thrift Saving Plan (TSP) is a blessing. But most people don’t agree. The workers who will retire or have retired under the Federal Employees Retirement System program, the TSP account is mandatory. It will give them one-third of their retirement income in addition to Social Security benefits and their FERS annuity, not indexed-to-inflation. Over a period, this diet cost of living adjustment formula means that any normal inflation or anything over 2% will consume their FERS annuity.
There are many long-time TSP investors with account balances worth $1 million or more. Many workers come under the $500,000 to $750,000 category, before the “correction.” During this Great Recession period, thousands of them moved their money from the C, S, and I Funds into the Treasury securities G fund. Though their money was safe, its growth rate was less as compared to the rebounding stock funds. Workers with stock funds continued buying at bargain-basement sale prices brought prosperity to their accounts. There are many things that can help you decide what to do and what not to do during this time. You should consider your risk tolerance capacity, age, and the time of retirement.
If you are a federal employee with a TSP account and have recently looked at your account, you might have seen big changes. The biggest-ever U.S. bull market celebrated its eleventh anniversary on 8 March, and the bear market started just 12 days later. A bear market reflects 20% or more drops in stock prices from its previous high.
All TSP stock funds (C, S, and I) boomed in February but started declining soon after that. Most of the time, it is difficult to find what led to the decline in the stock market, but this time, everyone is pretty sure that the main reason for this drop is one and the only one that is coronavirus spread.
This year, Bond prices appreciated a common human behavior that is seen when investors sell stocks. This increased the F fund share prices.
These days, market volatility has increased. For example, the stock market was up 9% but dropped 10% for the week, including Friday. An article from the Wall Street Journal stated that “the S&P 500 stock Index fluctuated and increased and decreased by at least 4% for five consecutive sessions, the longest fluctuation ever since the 1929 financial crisis.”
According to reports from sources, the average bear market dropped for the S&P 500 Index (the Index tracked by C Fund) by 35% and stayed for an average of 146 trading days (days when the stock markets are open).