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Old 01-10-2009, 10:54 AM   #21
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It does seem too good to be true. But remember (or realize if you're not familiar with it), this is the U.S. gov't running this and backing it up. It doesn't have to follow normal market rules. It's backed and subsidized by the full faith and credit of our gov't. You cannot compare it to anything else out there.
And unfortunately, not available to the schmucks who rely primarily on 401Ks for retirement, and probably need them most of all. it would be nice to have a higher-yielding "safe" alternative for money when you've been whacked 30% and watching your retirement fall years farther into the horizon...
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Old 01-10-2009, 11:45 AM   #22
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Oh, yes, there's no doubt that it's subsidized by the fed gov't. That's clearly the case. You couldn't possibly run a bond fund like this without that. But that's exactly the point and why it's such a good deal. You have the U.S. gov't backing this up and thus making it the safest deal around. Just like treasuries.

It's only available in the TSP. A very good deal indeed.
If you mean by "subsidized" that the fed govt puts money into it on an as-needed basis, that is not the case. The accounts are individual & no money is contributed other than the employee's & the govt match.

What the Treasury does do for TSP is issue an exclusive non-marketable security especially for the G-Fund. There is a statutorily prescribed formula based on all marketable Treasuries that determines what the G-Fund earns.

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Originally Posted by http://www.tsp.gov/rates/fundsheet-gfund.pdf
The G Fund rate is set once a month by the U.S. Treasury based on a statutorily prescribed formula (described below) .....

G Fund securities earn a statutory interest rate equal to the average market yield on outstanding marketable U.S. Treasury securities with 4 or more years to maturity. The G Fund rate is calculated by the U.S. Treasury as the weighted average yield of approximately 76 U.S. Treasury securities on the last day of the previous month. The yield of the
security has a weight in the G Fund rate calculation based on the amount outstanding. (The larger the dollar amount of a security
outstanding, the larger its weight in the calculation.) The Treasury securities used in the G Fund rate calculation have a weighted average
maturity of approximately 11 years. ...
Would TIPS be a better deal for a 10 year time frame? I don't know - that's what I'm trying to figure out. At least TIPS are guaranteeing a CPI match

While TSP G-Fund has the objective of a higher return than inflation - I don't think there is any specific guarantee of that.
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Old 01-10-2009, 11:55 AM   #23
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What the Treasury does do for TSP is issue an exclusive non-marketable security especially for the G-Fund. There is a statutorily prescribed formula based on all marketable Treasuries that determines what the G-Fund earns.
Well, call what you will. But when they're investing your money in 1-4 day maturity treasuries and guaranteeing you the yields of 11 yr avg maturity treasuries, with no risk of principal, I call that subsidization. That's the only way you can get that kind of special security.

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While TSP G-Fund has the objective of a higher return than inflation - I don't think there is any specific guarantee of that.
Well yes, that may be the case but I can't imagine that you would lose out to inflation with the structure that they have set up. The bond markets would have to be seriously out of whack for quite a long time for that to happen. I'm no expert on TIPS though.

I was just pointing out the features and structure of the G fund that your OP didn't seem to reflect an understanding of. Hope I've helped. Sorry if I didn't. Maybe somebody with some more financial expertise like Brewer or Yrs to Go can help out.
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