TSP Update

STWS Advisor Jennifer Meyer reviews the Thrift Savings Plan after an eventful January, S Fund up 36.45%

Jennifer Meyer, CFP

The new year is off to an interesting start, to say the least. The first week of January brought an attempted insurrection at the U.S. Capital building while Congress was validating the 2020 Presidential election results. The anticipated holiday COVID surge materialized by mid-January, overshadowing the vaccine rollout. By the third week of January with a new President in office, energy around accelerating the vaccination process nationwide took center stage. All of this may have left investors without energy to focus on the daily market movements, until the last week of January when the GameStop and Reddit phenomenon led to a surge in GameStop stock from approximately $20 per share on January 12th to a closing high of $396.51 on January 28. The soaring stock garnered global attention as the story around a retail-driven “short squeeze” drew the admiration of many and the ire of others. Amidst all of this activity, most TSP funds trended downward for the first month of the year. The exceptions being the S fund, which continued its positive momentum, and the G fund, which remained positive as usual but did not offer much in the way of gain. Note that all of the Lifecycle funds were negative for the month.

Performance figures for the month of January 2021 were just released on the TSP website. The best performer for the month was the S fund at 2.85%, while the I fund was the worst at -1.09%. Monthly returns for the last 12 months are shown below. (source, TSP.gov)

Year G Fund F Fund C Fund S Fund I Fund
Last 12 months 0.87% 4.73% 17.16% 36.45% 9.99%
2021 YTD 0.07% -0.71% -1.01% 2.85% -1.09%
2020 Monthly          
December 0.07% 0.14% 3.84% 7.24% 4.64%
November 0.07% 0.99% 10.95% 18.26% 15.54%
October 0.06% -0.42% -2.66% 0.50% -3.97%
September 0.06% -0.03% -3.80% -3.04% -2.60%
August 0.05% -0.81% 7.19% 7.20% 5.12%
July 0.06% 1.49% 5.64% 5.71% 2.33%
June 0.06% 0.63% 1.99% 4.00% 3.44%
May 0.06% 0.46% 4.76% 8.79% 4.50%
April 0.07% 1.78% 12.81% 15.81% 6.42%
March 0.11% -0.64% -12.40% -21.40% -13.87%
February 0.13% 1.82% -8.24% -8.01% -7.74%
January 0.17% 1.91% -0.04% -0.62% -2.73%

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 2019. (source, TSP.gov). Note that the TSP has not updated longer-term rates to include the 2020 calendar year at the time of writing.

Year G Fund F Fund C Fund S Fund I Fund
1 year 2.24% 8.68% 31.45% 27.97% 22.47%
3 Year 2.49% 4.16% 15.25% 11.14% 9.97%
5 year 2.27% 3.25% 11.71% 9.17% 6.20%
10 year 2.23% 3.99% 13.59% 13.08% 5.85%
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 for TSP participants to rebalance their accounts at least annually. The start of the new year is as good a time as any to take a look and rebalance if needed. In addition, the federal employee pay raise of 1% for 2021 provides an opportunity to increase TSP contributions.  Other items of note with regards to your TSP include the 2021 contribution limits. The IRS kept the limits for 2021 the same as they were in 2020. Employees under the age of 50 can contribute a maximum of $19,500 to their TSP while those age 50 and over can contribute an additional $6,500 as part of their “catch up” contribution. In addition, beginning in 2021, you will no longer need to make separate catch-up elections each year. Once an employee has maxed out their traditional contributions, they will automatically roll into the catch up if the employee is over age 50. In addition, employee’s elections will carry over from year to year going forward.

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**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.**

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