The C Fund, which has grown more than the other TSP funds over the last 12 months, experienced the biggest drop in an unimpressive month for the Thrift Savings Plan.
February brought continued volatility to market participants, including many TSP investors. The widely held C fund, which closely tracks the S&P 500 was down for the second straight month. However, the C fund is the best performing fund over the last 12 months by a wide margin. This points again to the importance of not making reactive moves solely based on short-term market fluctuations.
For the month of February, the large-cap focused C fund was below zero by the most at -2.99%. The I and F funds were also negative for the month, while the small-cap focused S fund was positive by a small amount. The G fund was the “most” positive at 0.14%. The bond focused F fund was the least negative at -1.08% for the month. Each of the L funds, including the most conservative of them, the L-Income fund, were negative for the month. As was the case in January, current market volatility is a good reminder that markets do go both up and down and investors need to be prepared for potential 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.
As we begin March, we are about 1 week into the Russian invasion of Ukraine. There is much uncertainty as to how this will play out over the coming weeks and months. As we know, the markets do not like uncertainty and have responded accordingly. Further, there has been little resolution to the other important factors weighing on the markets, namely interest rate hikes, and future inflation. There will be much emphasis this month on the Federal Reserve meeting and any actions taken as a result. Markets are expecting an interest rate hike for the first time since2018. How much of a hike this will be, and any insight into the Fed’s plans for the remainder of the year will be an important contribution to market sentiment for the month. Interestingly, the COVID virus seems to be the least important factor playing into the current volatility. Hopefully, this is an indication that we are finally moving past the worst days of the crisis.
Performance figures for the month of February 2022 have been posted on the TSP website. Monthly returns from 2022 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 | 1.51% | -2.47% | 16.37% | -6.52% | 3.06% |
| 2022 YTD | 0.28% | -3.15% | -8.01% | -10.05% | -6.47% |
| 2022 Monthly | |||||
| February | 0.14% | -1.08% | -2.99% | 0.03% | -2.61% |
| January | 0.13% | -2.09% | -5.18% | -10.07% | -3.96% |
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 February 28, 2022. (source, TSP.gov).
| Year | G Fund | F Fund | C Fund | S Fund | I Fund |
| 1 year | 1.51% | -2.47% | 16.37% | -6.52% | 3.06% |
| 3 Year | 1.47% | 3.35% | 18.20% | 13.35% | 8.10% |
| 5 year | 1.94% | 2.81% | 15.14% | 11.83% | 7.52% |
| 10 year | 1.94% | 2.70% | 14.60% | 12.57% | 6.56% |
| Inception Date | 4/1/1987 | 1/29/1988 | 1/29/1988 | 5/1/2001 | 5/1/2001 |
The TSP is a critical part of a federal 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.***
