The Thrift Savings Plan (TSP) offered to the current or retired employees of the federal civil service, is one of the simplest and most efficient retirement plans used today. However, out of thousands of civilian and military employees who defer a portion of their earnings into the plan each year, many of them do not have a clear picture of the TSP fund options available in this plan
There are five core investment funds available in the TSP:
#1 – TSP G Fund – Government Securities Investment Fund
Objective – to generate a higher rate of return than inflation without exposing the fund to risk of default and market price fluctuations.
Key Features
– Offers opportunity to earn interest rates similar to U.S. Government notes and bonds without risk of loss of principal.
– Is invested in short-term U.S. Treasury securities particularly issued to the TSP. Payment of principal and interest is guaranteed by the U.S. Government, so no “credit risk.”
– Interest rate resets monthly; is based on the weighted average yield of all outstanding Treasury notes and bonds with 4+ years to maturity.
– Earnings comprise entirely of interest income on the securities.
– Subject to inflation risk.
#2 – TSP F Fund – Fixed Income Index Investment Fund:
Objective – to match the performance of the Barclays Capital U.S. Aggregate Bond Index, a broad index representing the U.S. bond market.
Key Features
– Offers opportunity to earn rates of return more than money market funds in long term, with relatively low risk.
– Risk of nonpayment of interest or principal is relatively low because the fund includes only investment-grade securities and is broadly diversified.
– Earnings comprise of interest income on the securities and gains (or losses) in the value of the securities.
#3 – TSP C Fund – Common Stock Index Investment Fund
Objective – to match the performance of the Standard and Poor’s 500 (S&P 500) Index, a broad market index made up of stocks of 500 large to medium-sized U.S. companies.
Key Features
– Offers opportunity to earn high investment return in long term from a diversified portfolio of stocks of large and medium-sized US companies.
– Risk of loss if the S&P 500 Index declines in response to changes in overall economic conditions (market risk).
– Earnings comprise of gains (or losses) in the prices of stocks and dividend income.
#4 – TSP S Fund – Small Cap Stock Index Investment Fund:
Objective – to match the performance of the Dow Jones U.S. Completion Total Stock Market Index, a broad market index made up of stocks of U.S. companies not included in the S&P 500 Index.
Key Features
– Offers opportunity to earn high investment return in long term by investing in stocks of small and medium sized US companies.
– Risk of loss if the Dow Jones US Completion TSM Index moves up or down due to changes in economic conditions.
– Earnings comprise of gains (or losses) in the prices of stocks and dividend income.
#5 – TSP I Fund – International Stock Index Investment Fund”
Objective – to match the performance of the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index.
Key Features
– Offers opportunity to earn a potentially high investment return in long term by investing sticks of companies in developed countries outside the US.
– Risk of loss if the EAFE Index responds to changes in economic conditions or to increase in the value of US dollar.
– Earnings comprise of the gains (or losses) in stock prices, currency fluctuations of US dollar value and dividend income
#6 – TSP L Funds – “Lifecycle” Funds:
Objective – to provide the highest expected rate of return for the amount of risk expected.
Key Features
– Diversify participant accounts among the G, F, C, S, and I Funds by using tailored investment mixes.
– Do not guarantee protection against loss or elimination of risk.
– Returns are nearly equal to the weighted average of the G, F, C, S, and I Funds’ returns.
– Earnings are calculated daily, with a daily share price for each L Fund.
