The country continues to emerge from the COVID-19 pandemic with vaccine rollout nationwide accelerating from February into March. The promise of business re-opening and the lifting of travel restrictions played a key role in the continuing upward trend for U.S. equity markets, especially in the small-cap space. In addition, the passage of President Biden’s $1.9 trillion stimulus package promising additional cash funds to millions of American’s bank accounts as well as extending unemployment aid to millions still out of work was viewed as a positive for U.S. stocks. Key economic data in manufacturing was another bright spot for the economy. Small-cap stocks generally continued to outperform their larger peers for the quarter, despite some slowing in the trend during the month of March. Bond performance lagged as inflation concerns continued to persist in spite of reassurance from the Fed and Treasury Secretary Janet Yellen.
Performance figures for the month of March 2021 have been posted on the TSP website. The best performer for the month was the C fund at 4.38%, while the bond-focused F fund was the worst at -1.23%. 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 | 0.83% | 0.77% | 56.32% | 97.79% | 44.87% |
| 2021 YTD | 0.27% | -3.35% | 6.17% | 7.79% | 3.52% |
| 2021 Monthly | |||||
| 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 2020. (source, TSP.gov).
| Year | G Fund | F Fund | C Fund | S Fund | I Fund |
| 1 year | 0.97% | 7.50% | 18.31% | 31.85% | 8.17% |
| 3 Year | 2.03% | 5.38% | 14.13% | 15.25% | 4.68% |
| 5 year | 2.05% | 4.57% | 15.20% | 16.06% | 7.99% |
| 10 year | 2.04% | 4.07% | 13.90% | 13.32% | 5.87% |
| 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. While no one can predict what 2021 will bring with regards to investment returns, we do know that it is important that TSP participants take a proactive role in monitoring their TSP accounts. This does not mean checking their balances and trying to time the market. Rather, it means being aware of the options available and managing those options to maximize your personal retirement outcome. At Serving Those Who Serve, we have found many employees do not truly understand the Roth TSP versus Traditional TSP. Our podcast featuring Ed Zurndorfer is a great educational resource. Other items of note with regards to your TSP include the start of the transfer of some of the assets in the C, S, and F funds from Blackrock Institutional Trust Company to State Street Global Advisors Trust Company. The TSP added the second manager at the suggestion of an independent consulting firm who suggested that only using one manager could be too risky. The TSP announced it expected this transition to be complete by the end of June 2021. They note that the transfers will not impact the ability of participants to make changes to their TSP accounts. Finally, although it went mostly under the radar, TSP did recently implement a fee increase. Fees now range from a low of .049% in the G fund to a high of .068% in the S fund (source, TSP.gov).
Please reach out to us with your 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.***