The TSP funds all lost ground last month, except the G Fund. The S Fund had the biggest drop, going down over 10%.
For the monthly followers of this column, you may recall my 2021 summary noted that 2022 could be expected to be a bumpy, if not wild ride. One month in and we have already witnessed the realization of that vision. Fortunately, we know that one month is not a reliable indicator of long-term trends. However, a month like we just experienced can certainly test the mettle of the most disciplined investors.
All but one of the core TSP funds ended the month of January in the negative. The bond-focused F fund was least negative at -2.09% for the month. The I fund was the least negative of the three stock funds, with a negative return of -3.96% for the month. Each of the L Funds, including the most conservative L Income fund were negative for the month. The G fund, returning .13% for the month lays claim to the only “not negative” fund for the month. Safe to say, many TSP participants ended the month of January in the negative when compared to their year-end 2021 account values. This is a good reminder that markets do go both up and down and investors need to be prepared for the potential for losses in any given month. From a long-term investment perspective, this is exactly why one should not be focused on the month-to-month variations, but rather should remain focused on their long-term goals with TSP.
The uncertainty of future interest rate hikes, unknown answers about the course of inflation in 2022 and beyond, as well as escalating tensions overseas concerning Russia and Ukraine, are all contributing factors for the January volatility. Add in the continuing spread of Covid variants and uncertainty around when we may be able to put the virus behind us, and it was the perfect storm to create a very volatile market. The market did recover some losses as the month ended, settling some investors' nerves. As we enter February, a friendly reminder that it is critical that employees review their allocations within TSP and re-balance regularly 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 January 2022 have been posted on the TSP website. Monthly returns from 2021 and year-to-date returns for 2022 and longer-term averages are shown below. (source, TSP.gov)
| Year | G Fund | F Fund | C Fund | S Fund | I Fund |
| Last 12 months | 1.45% | -2.83% | 23.27% | -1.68% | 8.22% |
| 2022 YTD | 0.13% | -2.09% | -5.18% | -10.07% | -3.96% |
| 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 January 31, 2022. (source, TSP.gov).
| Year | G Fund | F Fund | C Fund | S Fund | I Fund |
| 1 year | 1.45% | -2.83% | 23.27% | -1.68% | 8.22% |
| 3 Year | 1.49% | 3.70% | 20.66% | 15.19% | 9.98% |
| 5 year | 1.95% | 3.70% | 16.74% | 12.37% | 8.40% |
| 10 year | 1.93% | 2.82% | 15.44% | 13.01% | 7.38% |
| 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 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 you are not sure how to adjust your pay to take advantage of these higher limits, please reach out to us for help. 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 (www.stwserve.com).
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.***
