This means the C Fund provided Thrift Savings Plan (TSP) investors with a return of 28.68% in 2021. This is the third consecutive year of significant positive returns for the C Fund. In 2020, the C Fund had a return of 18.31%. And, in 2019, it provided a return of 31.45%.
Investors in the C Fund were not the only TSP investors coming out ahead in the past year. The S Fund had a return of 12.45% and the I Fund had a return of 11.45%.
For those who closely track their investments, the S Fund finished ahead of all others in 2020 with a return of 31.85% and a return of 27.97% in 2019.
For those in the TSP who use the L Funds, 2021 was also a very good year for improving your TSP balance. The Lifecycle (L Funds) with the highest returns were the most aggressive funds as their percentage of stocks in the account is the highest.
This means the L 2065, L 2060, and L 2055 provided investors with the best annual returns (19.90%). The L 2050 fund had an excellent return of 16.34% and the L 2045 returns 15.4%.
For more conservative investors, note that the G Fund (often considered the safest TSP Fund) had a return of 1.38% for the year. The L Income Fund, which also includes some stock investments, had a much better return than the G Fund. The L Income return in 2021 was 5.42%.
99,000 TSP Millionaires
Looking at these TSP returns over the last several years, it is easy to see why there were almost 99,000 TSP participants with at least one million dollars in their TSP accounts at the end of October 2021. That number is likely to go even higher as of December 31st.
TSP Performance for December and 2021 Annual Returns
Here are the TSP returns for all of the TSP Funds for December and for all of 2021:
2021 Was Tumultuous Year—and TSP Returns Rewarded Those With Patience
Investors had a few opportunities to panic during the year. Human nature being what it is, there were undoubtedly some investors who saw their investments go down in some months and sold some of their TSP stock funds in an attempt to avoid any further drops if the market tanked.
The C and S Funds dropped in November and September. The C Fund dropped more than 1% in January 2021. A drop in the first month of the new year may have scared some investors who may have been thinking 2021 was not going to be a good year for their TSP.
The S Fund dropped more than 5% in November, 4% in September, more than 1.2% in July, down in May less than 1%, and also showed a negative return in March. But, for the year, the Fund provided patient investors with a return of 12.45%—despite the down months.
Rewarding Patience and Dampening Emotions
In the midst of a panic about COVID-19 infections, closing schools, closing stores, mandating vaccines via presidential executive orders, and creating a large workload for the judicial system, and the highest rate of inflation in almost 40 years, the stock market has carried on. No doubt, those who reacted quickly to the latest headlines and panicked by selling their stock investments lost money in the stock market.
Those that held on, and perhaps added to their investments upon hearing bad news, fared very well. That does not always happen, but long-term investors usually come out ahead.
For federal employees investing in the TSP, this provides them with a much richer retirement after turning in the federal employee identification cards as their TSP investments will provide a greater financial cushion during retirement.
Low Annual Salary Increase Offset by TSP’s Performance
The 2.7% 2022 federal pay raise is well below the annual rate of inflation for the year. While the annual raise is not a cost-of-living adjustment, the low raise obviously irritates many readers.
On the bright side, we hope that these same readers have substantial investments in the TSP. The excellent returns provided by the TSP in recent years will help provide more financial security after retirement. Those who panicked and sold stocks, and also may be complaining about low annual raises, have lost ground in securing their financial future.
For more conservative investors, note that the G Fund (often considered the safest TSP Fund) had a return of 1.38% for the year. The L Income Fund, which also includes some stock investments, had a much better return than the G Fund. The L Income return in 2021 was 5.42%.
Thrift Savings Plan C Fund Monthly Returns is at 5.58%, compared to 8.10% last month and -0.69% last year. This is higher than the long term average of 0.93%.
Investment in the I Fund offers the opportunity to experience gains from equity ownership of non-U.S. companies. Because it represents the stocks of companies in many developed countries (excluding the U.S.), it is an excellent way to diversify the stock portion of your TSP allocation.
The G Fund is invested in short-term U.S. Treasury securities specially issued to the TSP. Payment of principal and interest is guaranteed by the U.S. government. Thus, there is no “credit risk.”
While the C-Fund invests in companies that are included in the S&P 500, the S-fund includes smaller companies than those that would be found in the C-fund. The “S” in S-fund stands for “small company stocks” but includes companies with market capitalizations that are considered medium-sized and large.
Average TSP account balances for FERS participants reached $164,396.00, while average balances for CSRS participants reached $180,088.00 as of May 2022. Average TSP account balances for FERS participants reached $20,821.00, while average balances for CSRS participants reached $29,388.00 as of May 2022.
The best performing core stock fund is the C Fund which is “only” down 23.87%. The core stock fund with the worst performance so far in 2022 is the S Fund which is down 29.85%. Here are the latest performance results for all TSP Funds. FedSmith, Inc.
Your best bet is to stick with the C, S and I Funds. Here's the ratio we recommend for your portfolio: 80% in the C Fund, which is tied to the performance of the S&P 500. 10% in the S Fund, which includes stocks from small- to mid-sized companies that offer high risk and high return.
Based on the year you were born, the L 2025 Fund may be a good choice for you because it decreases exposure to risk as you near retirement. Based on the year you were born, the L 2030 Fund may be a good choice for you because you may have time to ride out any fluctuations in the market.
You should always put enough in your TSP to get the match, but after that, focus on your high-interest debt before investing further. Also, consider getting an emergency fund in place as well before investing more for retirement. Your emergency fund will help you stay out of debt in the future.
Depending on when you begin retirement, you can simply leave the money in the TSP let it continue to grow. If you do not need to access it yet, it might be wise to let it be. Similar to other retirement accounts, you will need to begin minimum withdrawals at age 72.
Most federal employees and their spouses will face Social Security taxation. ent of a Social Security dollar. In effect, the withdrawal from the TSP triggers two taxes—the tax on the TSP dollar and a tax on your Social Security that you wouldn't have had to pay otherwise.
Dave Ramsey's advice is to save 5% into the TSP to get the full match, then max out a Roth IRA, and then put more into the TSP if you are able to save more after that.
As of December 31, 2021, there were 112,880 millionaires in the federal government's Thrift Savings Plan (TSP). It may be awhile before that number is reached again. At the end of September 2022, there were only 65,494 TSP millionaires—a drop of 42% in the number of TSP millionaires since 2021.
If you feel daunted by your TSP plan, consider contributing the same percentage of your check per pay period, instead of a specific dollar amount. This way, if your compensation increases, the amount you contribute will increase at the same rate as well.
We found that 15% of income per year (including any employer contributions) is an appropriate savings level for many people, but we recommend that higher earners aim beyond 15%. So, to answer the question, we believe having one to one-and-a-half times your income saved for retirement by age 35 is a reasonable target.
If you want to avoid paying taxes on the taxable money in your TSP account for as long as possible, do not to take any distributions until the IRS requires you to do so. By law, you are required to take required minimum distributions (RMDs) beginning the year you turn 72.
In a previous article about how much money we “should” have in the Thrift Savings Plan by the time we begin withdrawals, I mentioned the 4% withdrawal rule. I use the word “rule” loosely, as it really is more of a 4% suggestion.
While they may not have as many funds to choose from, TSP participants do have one big advantage over most 401(k) investors: lower fees. The total expense ratio, which covers both investment and administrative fees, is 0.055% for individual TSP funds.
A surviving spouse who is entitled to receive all or a part of a deceased participant's TSP account will have his or her entire death benefit automatically deposited into a Beneficiary Participant Account (BPA).
Spouse beneficiaries can keep their balance in their TSP beneficiary participant account. Beneficiaries must first be identified and located, their Social Security numbers (or Employer Identification Numbers for estates or trusts) must be obtained and verified, and their addresses and dates of birth must be confirmed.
If you aren't putting at least 5% of your income into your TSP, to maximize the matching contributions from your agency, you're turning down free money.
If you exceed these limits by contributing to more than one employer plan, you may request a refund of excess deferrals from the TSP for the amount of contributions above these limits. To learn more about deferrals, read the fact sheet Annual Limit on Elective Deferrals.
What is the elective deferral limit? The elective deferral limit is the maximum amount members can contribute from their pay to their TSP account. It applies to both traditional and Roth TSP accounts. The elective deferral limit for individuals under the age of 50 can contribute up to $22,500 per year into the TSP.
If your vested account balance is $200 or more when you leave federal service, your TSP account stays right where it is until you need it. You can keep more of what you save thanks to our low costs. Plus, you can change your investment mix and transfer eligible money into your account.
In short, even if the recommendation is sound, any financial professional who recommends you move money from the TSP into an IRA could benefit financially from that move.
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.
– What is the safest TSP fund? The G fund is generally the safest option as it invests in government securities. Although you won't lose money investing in this fund, your rate of return will be low. This may be a good option if you are close to retirement.
If you want your TSP balance to be able to generate an inflation-indexed annual income of $10,000, most financial planners will suggest that you have a $250,000 balance at the time you retire. This is based on something called the “4% rule”.
Introduction: My name is Greg Kuvalis, I am a witty, spotless, beautiful, charming, delightful, thankful, beautiful person who loves writing and wants to share my knowledge and understanding with you.
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