Did you know that the five core Thrift Savings Plan (TSP) funds are available only to TSP participants? All of the funds are fully transparent and there are no hidden fees. Add to this annual TSP fees are among the lowest in the investment industry. It’s important to understand how the core funds work to create a balanced TSP investment portfolio.
The G Fund
The G Fund (Government Securities Investment Fund) invests in short-term U.S. Treasury securities. The G Fund is the only core fund that does not invest in an index and that’s why it’s considered a very safe, low risk investment. However, historically, the G Fund has the lowest rate of return.
The F Fund
The F Fund (Fixed Income Index Investment Fund) invests in a wide range of debt instruments, including publicly traded treasury and government agency securities, corporate and foreign bonds, and mortgage-backed securities. The F Fund is a low-to-medium risk.
The C Fund
The C Fund (Common Stock Index Investment Fund) is designed to match the S&P 500 performance. When companies in the S&P 500 do well, your S-Fund investment does well. However, the reverse is also true. That’s why the C Fund is considered a medium risk.
The S Fund
The S Fund (Small Cap Stock Index Investment Fund) holds the same securities as the Dow Jones U.S. Completion Total Stock Market Index. Since the S Fund covers a broader range of diversified domestic stocks, it’s considered a medium-to-high risk.
The I Fund
The I Fund (International Stock Index Investment Fund) includes stocks from Europe, Australasia, and the Far East. Though it offers greater stock diversity there’s greater volatility. The I Fund is considered a high risk.
“Like private-sector 401(k)s, TSP accounts have a Traditional and a Roth option. The difference between the two comes down to when you want to pay taxes.”
What Are Lifecycle Funds?
Lifecycle (L) Funds automatically divide your contributions among different combinations of the five core funds. The ratio of your investment is adjusted quarterly in order to gradually shift to more conservative investments as you age.
The Difference Between The Traditional & Roth TSP
Like private-sector 401(k)s, TSP accounts have a Traditional and a Roth option. The difference between the two comes down to when you want to pay taxes. With the Traditional TSP you save on taxes during your career by making pre-tax contributions and you pay taxes on the distributions you take in retirement. With the Roth TSP, you make contributions from your post-tax wages and distributions are tax free in retirement.
To develop the best TSP investment strategy for your retirement, consider working with an FRC® trained advisor who fully understands your federal benefits.
