Jennifer Meyer breaks down what affected your TSP investments in 2021, including a monthly review of December performance
As 2021 comes to a close, the country is facing yet another COVID surge as we were introduced to the Omicron variant shortly after Thanksgiving. In spite of this, December proved to be a positive month for all three of the stock funds in TSP, rebounding from a negative November. For the year-end, all but one of the 5 core funds ended in positive territory, and the C fund claims the top returning fund title for the year ended Dec. 31, 2021. The bond-focused F fund ended the year slightly negative for the first time since 2013.
As we look to what 2022 holds, there continues to be uncertainty around the timing and pace of inflation and how the Federal Reserve will respond to it. In December, the Fed indicated it plans 3 interest rate hikes in 2022, this change in monetary policy has been described as too late by some economists, and others maintain there is the potential that the Fed does not in fact raise rates at that pace at all. Easy monetary conditions and fiscal support provided by the government continue to be at the heart of the domestic political risks for investors in 2022. Add in the looming mid-term election cycle and one might expect 2022 to be a bumpy, if not wild ride at times. However, it is also important to note that corporate profits in the U.S. continue to be incredibly strong, which should drive continued economic growth. Investors have reason to enter 2022 with hope for a continued upward trend for markets both at home and abroad. It is critical that employees review their allocations within TSP and re-balance to maximize their long-term returns. The beginning of the year is a great time to do this if you have not done so recently.
Performance figures for the month of December 2021 have been posted on the TSP website. The best performer for the month was the C fund at 4.48%, while the F fund was the worst for the month, at negative 0.32%. Monthly and year-to-date returns for 2021 are shown below. (source, TSP.gov)
| Year | G Fund | F Fund | C Fund | S Fund | I Fund |
| Last 12 months | 1.38% | -1.46% | 28.68% | 12.45% | 11.45% |
| 2021 YTD | 1.38% | -1.46% | 28.68% | 12.45% | 11.45% |
| 2021 Monthly | |||||
| December | 0.12% | -0.32% | 4.48% | 0.58% | 5.10% |
| November | 0.13% | 0.30% | -0.69% | -5.03% | -4.66% |
| October | 0.13% | -0.04% | 7.00% | 5.43% | 2.46% |
| September | 0.11% | -0.86% | -4.65% | -4.00% | -2.81% |
| August | 0.11% | -0.18% | 3.03% | 2.00% | 1.76% |
| July | 0.13% | 1.15% | 2.37% | -1.24% | 0.72% |
| June | 0.12% | 0.74% | 2.33% | 3.46% | -1.44% |
| May | 0.13% | 0.34% | 0.69% | -0.66% | 3.61% |
| April | 0.13% | 0.82% | 5.33% | 4.23% | 3.09% |
| March | 0.11% | -1.23% | 4.38% | -0.39% | 2.35% |
| February | 0.08% | -1.45% | 2.76% | 5.21% | 2.26% |
| January | 0.07% | -0.71% | -1.01% | 2.85% | -1.09% |
Month-to-month trends as shown above are interesting, but it is important to remember that short-term market volatility is to be expected and employees should not be making investment decisions based on short-term performance. Following are longer-term rates of return for each fund, as of December 2021. (source, TSP.gov).
| Year | G Fund | F Fund | C Fund | S Fund | I Fund |
| 1 year | 1.38% | -1.46% | 28.68% | 12.45% | 11.45% |
| 3 Year | 1.53% | 4.81% | 26.02% | 23.80% | 13.87% |
| 5 year | 1.96% | 3.66% | 18.44% | 15.27% | 9.90% |
| 10 year | 1.93% | 3.13% | 16.57% | 15.06% | 8.38% |
| Inception Date | 4/1/1987 | 1/29/1988 | 1/29/1988 | 5/1/2001 | 5/1/2001 |
The TSP is a critical part of an employee’s retirement plan. The IRS recently released the 2022 contribution limits for TSP participants, increasing the maximum contribution for those under age 50 to $20,500 annually. In addition, those employees over age 50 can contribute an additional $6500 in 2022 for a maximum contribution of $27,000. If an employee over age 50 wishes to maximize their 2022 contribution they should increase their contribution to $1039 per pay prior to December 18, 2021. Employees under age 50 should contribute $789 per pay to maximize their contribution for 2022. Another important consideration is the use of Roth versus Traditional TSP. Our advisors are happy to discuss the pros and cons of both plans with employees. Please feel free to make an appointment for a complimentary consultation via the Serving Those Who Serve website.
Please reach out to us with questions and follow our website for the most recent updates. We also run a monthly TSP webinar focused on education and presented by federal benefits expert, Ed Zurndorfer. Here is a link to our upcoming webinars.
**Written by Jennifer Meyer, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Jennifer Meyer and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
***The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees and members of the uniformed services, including the Ready Reserve. The TSP is a defined contribution plan, meaning that the retirement income you receive from your TSP account will depend on how much you (and your agency or service, if you're eligible to receive agency or service contributions) put into your account during your working years and the earnings accumulated over that time. The Federal Retirement Thrift Investment Board (FRTIB) administers the TSP.***
