Which TSP plan is best? (2023)

What is the best TSP plan?

For more conservative investors, note that the G Fund (often considered the safest TSP Fund) had a return of 1.38% for the year. The L Income Fund, which also includes some stock investments, had a much better return than the G Fund. The L Income return in 2021 was 5.42%.

The C, S, I and F funds have all lost money in 2022 while the G Fund has the inherent advantage of being guaranteed by the government. In other words, the G Fund can't lose money while all the other funds have suffered losses.

– What is the safest TSP fund? The G fund is generally the safest option as it invests in government securities. Although you won't lose money investing in this fund, your rate of return will be low. This may be a good option if you are close to retirement.

Dave Ramsey's advice is to save 5% into the TSP to get the full match, then max out a Roth IRA, and then put more into the TSP if you are able to save more after that.

Consider investing in the G Fund if you would like to have all or a portion of your TSP account completely protected from loss.

The C Fund can be useful in a portfolio that also contains stock funds that track other indexes such as the S Fund and the I Fund. By investing in all segments of the stock market (as opposed to just one), you reduce your exposure to market risk. The C Fund can also be useful in a portfolio that contains bonds.

The rate-of-return for the G-Fund is guaranteed to be positive, but the returns are generally low (last month's +0.21% for example) and the gains haven't kept pace with inflation for years (and it's not even close as of late). The annual return for the G-Fund hasn't been over 3% since 2008.

Accelerating inflation and rising interest rates led to a rout in stocks over the last six months. The S&P 500 index (the index on which the TSP's C Fund is based) is down 21% through June 30, 2022 (the C Fund is down 19.96%). This loss is the worst six months in the start of a year since 1970.

While the C-Fund invests in companies that are included in the S&P 500, the S-fund includes smaller companies than those that would be found in the C-fund. The “S” in S-fund stands for “small company stocks” but includes companies with market capitalizations that are considered medium-sized and large.

How risky is the C fund?

The Risks and Potential Growth

According to the TSP website, the C Fund contains market risk and possible inflation risk. Because the value of what a participant has invested in the C Fund is dependent on the stock prices of the S&P 500 companies, there is an inherent risk that the prices could drop and incur a loss.

For most, the Roth TSP is the better choice because currently, you're in a lower tax bracket than you'll be in the future. With a Roth, your earnings and withdraws are tax-free because you contribute after-tax money, meaning you pay taxes upfront.

Average return since inception (1988) is 10.43% .

To receive the maximum Agency or Service Matching Contributions, you must contribute 5% of your basic pay each pay period.

If you qualify for federal match funds, you should contribute to your TSP at least up to this limit (3% of your salary). Beyond this, it can make sense to have a Roth IRA alongside your Roth TSP: No rules prevent you from contributing to both. Ideally, you could max out both accounts to boost your retirement savings.

Taking a loan from your TSP is a bad idea. The money you're putting into your TSP is for retirement, not for buying a new car. If you leave federal employment with an outstanding TSP loan you have to pay back the full loan balance (opens in new tab) within 90 days.

F Fund investors are rewarded with the opportunity to earn higher rates of return over the long term than they would from investments in short-term securities such as the G Fund.

Is the F Fund a good investment? It's a good investment if your investing goals are in alignment with the objective of the F Fund, which is for diversification, lower risk than the G Fund, and capital preservation. But it still has risks just like any investment.

What is the current G fund interest rate?

Thrift Savings Plan G Fund Monthly Returns is at 0.28%, compared to 0.25% last month and 0.11% last year. This is lower than the long term average of 0.37%.

Thrift Savings Plan C Fund Monthly Returns is at -9.21%, compared to -4.08% last month and -4.65% last year. This is lower than the long term average of 0.90%.

Now, there are about 72,000 TSP millionaires — a nearly 36% decline — according to the Federal Retirement Thrift Investment Board.

You do earn TSP dividends. In fact, you'd get the same amount of dividends that you'd get from any similar stock index fund. However, in the TSP's effort to reduce administrative expenses, the dividends are automatically reinvested.

But the decline in G Fund returns is not because the government has gotten stingy, it is a combination of historically lower inflation and interest rates.