Make Your Retirement Count – A Look at the November Numbers and More

The federal government has arguably one of the best retirement plans out there, but that doesn’t mean you should sit back and not pay attention.

Kim Weaver is the Director of External Affairs at the Federal Retirement Thrift Investment Board. She told Chris Dorobek on the DorobekINSIDER program that November was all-in-all a great month for the TSP.

“All the funds did pretty well, except for the F-fund and that was down only slightly,” said Weaver.

“It has been an excellent year. I don’t think you can really ask for more than 29% or 34% with the C and the S-Funds and 20% with the I-Fund. Those numbers won’t continue for forever. Past performance is no predictor of future performance. But if people have had a diversified portfolio they should be doing quite well in their TSP,” said Weaver.

Bad news for the F-Fund?

“The F-fund will be bumping along on the bottom for the rest of the year, but keep in mind as the Feds decides to pull back on their stimulus, when they start to decide that, interest rates will start to go up, and that will push the F-fund down. When that is going to happen is completely unknown,” said Weaver.

There has been a new proposed bill to create a new fund for the TSP. Is this good?

“There were two bills dropped in the House and the Senate – companion bills – that would require us to create a corporate responsibility stock index fund. It would require us to pick an index that would be comprised of stocks based on certain criteria. The criteria are corporate governance, environmental practices, workplace relations, product safety, international operations and human rights involvement with repressive regimes and community relations,” said Weaver.

• Similar bills have been introduced before, and we have voiced our concerns about them in the past. Based on our studies and on the Employees Thrift Advisory Council (E-TAC) – made up of 15 organizations representing participants – there doesn’t seem to be a high demand for this kind of fund.
• It would duplicate by definition other stocks that are in the C and S funds. And most importantly and most fundamentally the Thrift Plan doesn’t exist to further social goals. We are here to provide a retirement plan for federal employees.
• GAO did a report on this issue last year. They found that if they added a hypothetical SRI index that tracked the best performing SRI stock index it would not have increased returns or lowered volatility. So, adding such a fund would not be a benefit.

“We will be communicating with the Congressional staff to share our concerns,” said Weaver.

New options on the horizon?

“The other opportunity that will be available to participants, possibly in the future, is in the 2009 Thrift Savings Enhancement Act it gave us the authority to offer a mutual fund window. Which is a way for people to go outside the TSP and invest in different things. We have a research project going on right now to try to figure out what would be the cost and the benefit, what would be the technical hurdles associated with that. But should we at some point implement a mutual fund window, then a participant could then put their money in whatever funds they would want to,” said Weaver.

Is the end of year a good time for a financial checkup? Weaver explained:

• We send out an annual statement to all of our 4.6 million participants. It tells them how much they have contributed, how much they have earned, what their employer contributions are if they are FERS employees. It tells them what their monthly payout would be if they were 62 and ready to take their money out. That way they get a sense and can say, I have $100,000 in my TSP account, what would that give me if I were 62 today and retiring. It is sort of a gut check. You can ask, ‘Is this what I expected?’
• It is also a good time to look at your asset allocation because obviously as the market grows your asset allocation can get out of whack from the way you intended. So, it is a good time to look at the statement and see if you understand where you account is and where it is growing. If you have questions, call our call centers. They are more than happy to answer any and all questions.