jazz4cash
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W2R and Zinger
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Thrift Savings Plan (TSP)
- Thread starter beowulf
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frugal-one
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I got out of the TSP when I found out the government was using/robbing G funds. The day I did it the word was you could not take money out of these funds for a certain length of time since the money was being used. If any other business took money out of retirement funds they would go to jail. Took the money out almost 7 years ago and never looked back! BTW put in Vanguard.
W2R
Moderator Emeritus
I remember seeing articles that implied that, but AFAIK that did not actually happen.
What I do know is that I have been taking money out of the G Fund every single month for 8 years with no problems or delays whatsoever.
ziggy29
Moderator Emeritus
I hear that. But for now, I've not seen the G fund "robbed" in that I haven't seen any indication that posted returns have not been given out.
To me, continued access to the G fund is the main reason to always keep some money in the TSP.
donheff
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The government robs the G fund in the same manner it robs the funds invested in Treasuries or in the SS trust fund - to fund current obligations. That doesn’t mean you couldn’t get your money out or that the obligation would not be met. Would you run away from TIPs because the government is using the funds you invest in them?
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beowulf
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For those of you who are staying in the TSP primarily for the advantages of the G fund, the following was just published in the Concurrent Budget Resolution for FY 2018. This is a summary and you need to read the entire report for the exact language. This is a low hanging fruit item that, I believe, has a good chance of making it into the final budget. Better than limits to what the government will contribute to our help plan or other equally draconian proposals.
Change Rate of Return in the TSP’s G Fund
The Report also targets the interest rate currently being paid to investors by the G fund in the Thrift Savings Plan. The Report notes that the interest rate now being paid by the G fund (the most popular fund in the Thrift Savings Plan) is is a rate more appropriate for a security that is for a longer term. In effect, “those who participate in the G Fund are rewarded with a long-term rate on what is essentially a short-term security.”
The Report proposes to save money by “correctly aligning the rate of return on U.S. Treasury securities within the Federal Employee Retirement System’s Thrift Savings Plan with its investment risk profile. Securities within the G-Fund are not subject to risk of default. Payment of principal and interest is guaranteed by the U.S. Government. Yet the interest rate paid is equivalent to a long-term security.”
The most popular fund in the Thrift Savings Plan is the G fund. According to the latest TSP figures, the rate of return for the G fund in 2017 has been 2.23%. The proposed change would reduce this interest rate so that those investing in the G fund would receive a smaller return. That would probably encourage more TSP investors to put their money into alternative funds. It would, however, certainly reduce the popularity of the G fund which is a unique fund that is not available to the general public. It was created as a unique part of the Thrift Savings Plan as part of changing the Federal retirement program from CSRS to FERS.
Change Rate of Return in the TSP’s G Fund
The Report also targets the interest rate currently being paid to investors by the G fund in the Thrift Savings Plan. The Report notes that the interest rate now being paid by the G fund (the most popular fund in the Thrift Savings Plan) is is a rate more appropriate for a security that is for a longer term. In effect, “those who participate in the G Fund are rewarded with a long-term rate on what is essentially a short-term security.”
The Report proposes to save money by “correctly aligning the rate of return on U.S. Treasury securities within the Federal Employee Retirement System’s Thrift Savings Plan with its investment risk profile. Securities within the G-Fund are not subject to risk of default. Payment of principal and interest is guaranteed by the U.S. Government. Yet the interest rate paid is equivalent to a long-term security.”
The most popular fund in the Thrift Savings Plan is the G fund. According to the latest TSP figures, the rate of return for the G fund in 2017 has been 2.23%. The proposed change would reduce this interest rate so that those investing in the G fund would receive a smaller return. That would probably encourage more TSP investors to put their money into alternative funds. It would, however, certainly reduce the popularity of the G fund which is a unique fund that is not available to the general public. It was created as a unique part of the Thrift Savings Plan as part of changing the Federal retirement program from CSRS to FERS.
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It's just been that kind of week for me. I'm planning to convert some C and S funds to the G fund tomorrow. So, of course they are about to make the G fund less profitable.
donheff
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
If they significantly change the rate of return on G I would have to revisit my intent to stay. In the meantime, all is good. It may seem like long term rate but it is based on an average of rates, excluding very short term: "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." This formula was applied because it is the formula used to value the Civil Service Retirement and Social Security Trust Funds. In many respects it is fair to treat it as a long term investment since people do invest in it for the long term. In fact, while holders can exchange G for other funds within TSP, they can't just sell G at any point without penalty unless they are 59.5+.
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retiredunder50
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Congress has tried reducing the G fund rate before. Here is an article about an attempt in 2015:
http://www.pionline.com/article/201...mployee-contributions-and-lower-g-fund-return
It might pass this year, but then again, it might not.
http://www.pionline.com/article/201...mployee-contributions-and-lower-g-fund-return
It might pass this year, but then again, it might not.
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Amethyst
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But TSP can't know if you have other IRA's that require RMD's, so how can they know the right amount to w/d on your behalf? 
Example: Mr. A.'s RMD's are less than Vanguard calculates, because we are more than 10 years apart in age. So we *tell* VG how much to w/d, and also how much to w/h in Federal and state taxes. VG doesn't do anything without asking us, and I would hope TSP wouldn't, either.
This is what I understand. If my RMDs say I should take $1200 a month and I am only taking $1000 a month then at the end of the fiscal year the TSP will send me an additional withdrawal of $2400 to make sure I take the appropriate RMDs for the year. So just start monthly withdrawals and it will all work out. Please let me know if I'm wrong.[/QUOTE]
Example: Mr. A.'s RMD's are less than Vanguard calculates, because we are more than 10 years apart in age. So we *tell* VG how much to w/d, and also how much to w/h in Federal and state taxes. VG doesn't do anything without asking us, and I would hope TSP wouldn't, either.
This is what I understand. If my RMDs say I should take $1200 a month and I am only taking $1000 a month then at the end of the fiscal year the TSP will send me an additional withdrawal of $2400 to make sure I take the appropriate RMDs for the year. So just start monthly withdrawals and it will all work out. Please let me know if I'm wrong.[/QUOTE]
jazz4cash
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Something else to consider is that G fund anchors the fixed allocation for all the Lifecycle funds. The Lifecycle Income fund that all the L funds migrate to is composed of 74% G along with F,C, S, and I. Lifecycle Income is the other unique fund within TSP that I mentioned earlier. Changing the G fund formula should cause all Lifecycle fund investors to reconsider their allocation, but it's more likely they will just take a hit.
A couple of posts on changes to the TSP were moved to start a new thread specifically on that topic, which is really not related to the OP. New thread here http://www.early-retirement.org/forums/f28/possible-changes-to-tsp-88707.html
Travelfreek
Recycles dryer sheets
My vote is to roll it ALL to a low cost investment account where your other investments are for the sake of simplicity. The TSP worked well for me to save a nest egg. Once I retired and eventually rolled it all to Fidelity, I can manage it so much better with their very easy online tools. Our trust is very simple - house + money in credit union + Fidelity IRA accounts in each my name and my husband's name. Period.
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beowulf
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RMDs are calculated on IRAs and 401Ks separately. The TSP counts as a 401K, not an IRA. You add up the value of all your IRAs as of Dec 31 of each year you are required to uptake a RMF and use that total as the base to calculate your RMD. You can take the total RMD from one IRA or any combination of IRAs. The RMDs for the TSP and 401Ks are calculated separately for each one and the RMD for each has to be withdrawn from that specific one. For example, if you have 3 IRAs, you only need to make the total RMD withdrawal for all 3 from one IRA. If you have the TSP and two other 401Ks, you have to take three separate withdrawals. Hence the desire to simplify the number of separate 401K accounts you have.
