Things to Think About Before Transferring Funds to the TSP’s G Fund

Market downturns are causing losses for several of the funds in the government’s 401(k)-style retirement savings scheme, but the G Fund is expanding.

So it’s official now. The G Fund is currently the largest of the five necessary TSP funds. That is no small accomplishment given that the C Fund, the second-largest fund, seems to have more than $200 billion funded.

While we wait for the precise figures from the most current TSP Investment board of directors, the G Fund is estimated to possess between $215 and $220 billion, depending on market performance.

Why did this happen?

The G Fund is currently in the lead for two key reasons.

Other funds are first having trouble: in contrast to the G Fund, which has the apparent advantage of being backed by the government, the C, S, I, and F funds have all experienced losses in 2022. 

In another sense, the G Fund cannot experience a loss when the other funds have. Because of this, the additional funds’ sizes have fluctuated in contrast to the stable G Fund based on market performance.

Passengers are abandoning the ship: Many consumers are fleeing the riskier stock funds, such as C, S, and I, in favor of the safety of the G Fund because of the market volatility. Therefore, the other funds are losing value due to recent market performance and withdrawals by individual government employees.

But most of those federal workers are unaware that this could be the worst time to use the G Fund.

Right now, big opportunities.

There are usually positive and negative market news stories. The unfortunate news is that it hurts to see account balances decline.

The good news is that there’s a fantastic opportunity to position yourself for success in the future. Because you can invest at a significant discount while the market is down, consider this. Since January 2022, the C Fund has lost around 20%, meaning that you may purchase many more shares of the C Fund with the same TSP commitment as previously.

Down markets are a very effective time to buy low and sell high later while working.

You would be doing the opposite by depositing all your money in the G Fund at this time: purchasing high and losing value. This approach can eventually work against your ability to save enough money for retirement.

Arriving soon or already retired?

What if you are nearing retirement and don’t have much longer to “buy low” by adding new funds to your TSP?

It becomes even more crucial for those who are retired or about to retire to earn a profit, so you should create an investing plan to assist you in doing so forever.

More about the G-fund

What Benefits Does the G-Fund Offer?

G-Fund is secure. You have the U.S. government’s guarantee that you won’t lose money while investing in the G-fund. 

It is a fantastic option for individuals approaching retirement or needing to balance their portfolios with a few secure assets. The return on long-term treasuries is also guaranteed, but you can trade in and out of them just like you would short-term treasuries. In essence, it offers considerable rewards with almost minimal risk. 

You also won’t find it anywhere else in the world because providing this fund for the government’s employees costs the government money each year.

What drawbacks does the G Fund have?

The G fund’s main drawback is that it exposes investors to inflation risk and provides comparatively modest returns. Although the value of the funds has generally risen faster than inflation, this will not always be the case. In other words, there is a possibility that investors who invest in the G fund will “outlive” their funds. Simply put, the returns might not be enough.

What should investors do?

In general, those who don’t want to earn much more or engage in active management should consider transferring to a Lifecycle fund. However, the circumstances can differ depending on people’s risk tolerance and how close they are to retirement. 

For those still “sitting on” money that is entirely in the G fund, it’s crucial to think about whether or not this will benefit them. Although we spend a lot of time pleading with people to fund TSP, it’s crucial to consider what individuals are actually funding when they contribute to TSP.

Contact Information:
Email: [email protected]
Phone: 8889193252