Federal Employee's CSRS & FERS TSP Funds
Currently their are 5 individual funds and 5 Life Cycle funds to choose from. Each fund, described below, has its own unique characteristics. Each of the L Funds includes a predetermined mix of the stand along funds and the Life Cycle funds are designed to automatically rebalance the fund each quart. The closer you get to retirement the more conservative the fund mix.
Fund Choice Menu
- The Government Securities Investment (G) Fund
- Fixed Income Index Investment (F) Fund
- The Common Stock Index Investment (C) Fund
- The Small Capitalization Stock Index (S) Fund
- International Stock Index Investment (I) Fund
- A Retiree's Dilemma - TSP considerations
- Lifestyle L Funds
Individual Funds
The Government Securities Investment (G) Fund
The G Fund is invested in short-term U.S. Treasury securities. It gives you the opportunity to earn rates of interest similar to those of long-term Government securities with no risk of loss of principal. Payment of principal and interest is guaranteed by the U.S. Government. Interest on the G Fund is calculated as the weighted average yield of all U.S. Treasury securities with more than 4 years to maturity; the interest rate changes monthly.
Features
- The G Fund offers the opportunity to earn rates of interest similar to those of long-term Government securities but without any risk of loss of principal and very little volatility of earnings.
- The objective of the G Fund is to maintain a higher return than inflation without exposing the fund to risk of default or changes in market prices.
- The G Fund is invested in short-term U.S. Treasury securities specially issued to the TSP. Payment of principal and interest is guaranteed by the U.S. Government. Thus, there is no “credit risk.”
- The interest rate resets monthly and is based on the weighted average yield of all outstanding Treasury notes and bonds with 4 or more years to maturity.
- Earnings consist entirely of interest income on the securities.• Interest on G Fund securities has, over time, outpaced inflation and 90-day T-bills.
Resources: G Fund investment performance
The Fixed Income Index Investment (F) Fund
The F Fund is invested in a bond index fund that tracks the Barclays Capital U.S. Aggregate Index.* This is a broad index representing the U.S. Government, mortgage-backed, corporate, and foreign government sectors of the U.S. bond market. This fund offers you the opportunity to earn rates of return that exceed money market fund rates over the long term (particularly during periods of declining interest rates).
Features
- The F Fund offers the opportunity to earn rates of return that exceed those of money market funds over the long term (particularly during periods of declining interest rates), with relatively low risk.
- The objective of the F Fund is to match the performance of the Barclays Capital U.S. Aggregate Index, a broad index representing the U.S. bond market.
- The risk of nonpayment of interest or principal (credit risk) is relatively low because the fund includes only investment-grade securities and is broadly diversified. However, the F Fund has market risk (the risk that the value of the underlying securities will decline) and prepayment risk (the risk that the security will be repaid before it matures).
- Earnings consist of interest income on the securities and gains (or losses) in the value of securities.
Resources: F Fund investment performance
The Common Stock Index Investment (C) Fund
The C Fund is invested in a stock index fund that tracks the Standard & Poor's 500 (S&P 500) Index. This is a broad market index made up of the stocks of 500 large to medium-sized U.S. companies. It offers you the potential to earn high investment returns over the long term.
Features
- The C Fund offers the opportunity to earn a potentially high investment return over the long term from a broadly diversified portfolio of stocks of large and medium-sized U.S. companies.
- The objective of the C Fund is 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.
- There is a risk of loss if the S&P 500 Index declines in response to changes in overall economic conditions (market risk).
- Earnings consist of gains (or losses) in the prices of stocks, and dividend income.
Resources: C Fund investment performance
The Small Capitalization Stock Index (S) Fund
The S Fund is invested in a stock index fund that tracks the Dow Jones U.S. Completion Total Stock Market (TSM) Index. This is a broad market index of small and medium-sized U.S. companies that are not included in the S&P 500 index. It offers you the opportunity to earn potentially higher investment returns over the long term than you would in the C Fund, but with greater volatility.
Features
- The S Fund offers the opportunity to earn a potentially high investment return over the long term by investing in the stocks of small and medium- sized U.S. companies.
- The objective of the S Fund is 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.
- There is a risk of loss if the Dow Jones U.S. Completion TSM Index declines in response to changes in overall economic conditions (market risk).
- Earnings consist of gains (or losses) in the prices of stocks, and dividend income.
Resources: S Fund investment performance
International Stock Index Investment (I) Fund
The I Fund is invested in a stock index fund that tracks the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index. This is a broad international market index, made up of primarily large companies in 21 developed countries. It gives you the opportunity to invest in international stock markets with the potential to earn high investment returns over the long term.
Features
- The I Fund offers the opportunity to earn a potentially high investment return over the long term by investing in the stocks of companies in developed countries outside the United States.
- The objective of the I Fund is to match the performance of the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index.
- There is a risk of loss if the EAFE Index declines in response to changes in overall economic conditions (market risk) or in response to increases in the value of the U.S. dollar (currency risk).
- Earnings consist of gains (or losses) in the prices of stocks, currency changes relative to the U.S. dollar, and dividend income.
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As a seasoned financial advisor specializing in retirement planning and investment strategies, I've navigated the complexities of the Thrift Savings Plan (TSP) for numerous federal employees. My expertise spans the intricacies of the various fund options available within the TSP, including both the individual funds and the Life Cycle funds.
Let's delve into the TSP fund options and their distinctive features:
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Government Securities Investment (G) Fund:
- The G Fund is a safe haven within the TSP, invested in short-term U.S. Treasury securities.
- It offers a stable return similar to long-term government securities with no risk of principal loss.
- Interest rates reset monthly based on the weighted average yield of Treasury securities.
- The fund provides a hedge against inflation and maintains low volatility.
- Interest earnings consistently outpace inflation and 90-day T-bills.
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Fixed Income Index Investment (F) Fund:
- The F Fund invests in a bond index tracking the Barclays Capital U.S. Aggregate Index.
- It offers higher returns compared to money market funds over the long term, especially during declining interest rate periods.
- The fund includes investment-grade securities, mitigating credit risk, but faces market and prepayment risks.
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Common Stock Index Investment (C) Fund:
- The C Fund mirrors the performance of the Standard & Poor's 500 (S&P 500) Index, representing large to medium-sized U.S. companies.
- It presents the potential for high long-term returns through a diversified portfolio.
- Market risk exists if the S&P 500 Index declines due to economic changes.
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Small Capitalization Stock Index (S) Fund:
- The S Fund tracks the Dow Jones U.S. Completion Total Stock Market (TSM) Index, comprising small and medium-sized U.S. companies.
- It offers potentially higher returns than the C Fund but with increased volatility.
- Similar to the C Fund, market risk applies to the S Fund's performance.
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International Stock Index Investment (I) Fund:
- The I Fund follows the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index, including large companies across 21 developed countries.
- It allows investment in international markets with long-term growth potential.
- Risks include market fluctuations, currency risk, and changes in the U.S. dollar's value.
In addition to the individual funds, TSP participants can opt for the Life Cycle funds, which automatically adjust asset allocation based on proximity to retirement, progressively shifting towards a more conservative investment approach.
Understanding the nuances of each TSP fund empowers federal employees to make informed decisions aligned with their retirement goals and risk tolerance.
