GovernmentExecutive.com

Each of the five basic funds in the Thrift Savings Plan posted solid gains in November.

The 401(k)-style retirement savings plan for federal employees, now worth more than $200 billion, made the biggest strides last month in investments in small- and mid-sized domestic companies. The S Fund, which invests in these companies by tracking the Dow Jones Wilshire 4500 Index, earned 3.54 percent in November for a 12-month total return of 15.61 percent.

International investments represented in the I Fund gained 2.96 percent last month. The fund's 28.2 percent 12-month return remains by far the highest in the TSP.

The C Fund, which tracks Standard & Poor's 500 Index of stocks in the largest domestic companies, grew 1.91 percent last month. The fund -- one of the first created in the TSP -- remains a popular choice with investors. Its 12-month return is 14.25 percent.

Longer-term returns drop precipitously when it comes to the F Fund, which is invested in fixed-income bonds. In November, the F Fund earned 1.08 percent, bringing its year-long growth to 5.96 percent.

Still, the F Fund's long-term growth is higher than that of the ever-reliable but less-than-flashy G Fund. The government securities that make up the G Fund are specially issued for TSP participants to provide a higher return than inflation without any serious risk from market fluctuations. Last month, the G Fund gained 0.43 percent for a 12-month return of 5.04 percent.

A private investment firm hired by the TSP Board recommended in November that the plan stay the same for the time being, so it looks less likely that participants will have any new funds to follow in the near future.

There are the lifecycle, or L, funds, which are blends of the five underlying investment options that automatically grow more conservative as participants age. In November, the L funds aimed at younger and more aggressive investors earned the most.

L 2040, intended for employees with a target retirement date around the year 2040, gained 2.32 percent last month. The L 2030 Fund earned 2.03 percent; the L 2020 gained 1.78 percent; the L 2010 increased 1.34 percent; and the L Income, designed for employees with planned retirements in the very near future, grew 0.79 percent.

Over the past 12 months, the L Funds with riskier allocations also earned more. L 2040 gained 16.54 percent, L 2030 grew 15.04 percent, L 2020 gained 13.65 percent, L 2010 earned 11.11 percent and L Income made 7.55 percent.

COMMENTS

• Oh, my… First off, thanks Numbers, it finally sank it. I’ve found that sometimes the mind’s eye lies to you. You get something in your head so hard that it just won’t come out, to the point that you can’t see certain things even as you read them. “There is none so blind as he who will not see.” From your first answer. “http://www.tsp.gov/forms/oc91-13w.pdf”, I quote “Elective deferrals do not include … Agency Matching Contributions because those contributions are not considered part of your pay.” (P.S. Please don’t tell anyone I actually acknowledged being wrong. Sigh) Thanks, as always, for the individual assistance, the support of this readership, and GovExec.com . Tip off (and slowly losing it) GovExec.com reader Posted December 20, 2006 2:04 PM
• Tip, you are making the calculation harder by coming at it backwards. First, the over-50 catch-up contributions are a separate category of contribution, and come into play after your regular contributions. Thus, they have no effect on match. Now, to figure how to max out the regular contributions (i.e., the full $15,500) without losing any match. Regular contributions up to 5 percent of pay in any given pay period are matched. So the trick is to make sure you are contributing at least 5 percent of basic pay to the TSP in each and every pay period of the year. The simplest method is to divide the $15,500 by 26 so that an equal amount of the tax max is contributed each pay period. The answer is $597. If you were to contribute significantly more than the $597 per pay period, you risk the possibility that you will max out before the last pay period of the year, and then you will get no matching contributions for any pay period after that. The tricky part, which the standard calculators do not provide for, is if you wish to accelerate your contributions in the early part of the year (so as to start accumulating investment gains as soon as possible) and then scale back for the rest of the year to just keep the match. For that, divide your annual salary by 20 (or multiply by 0.05). In your example of $60,000 salary, that would be $3,000. This the amount that must be spread over every pay period of the year to keep the match going right up to the end. Subtract that from the tax max of $15,500 equals $12,500. This is the amount that you can contribute early. Divide it by an amount per pay period that you can afford and that will give you the number of pay periods you can contribute the higher amount (let's be really aggressive and say $1,500, which will eat up most of your take-home pay, that would be eight pay periods of the higher contribution). Then you must submit a new election form to reduce your contributions for the rest of the year to 5 percent of pay. (In our aggressive example, that would be the ninth pay period of the year.) The difficulty here is in the timing. If your new election is one pay period too early or late, you might be under the tax max or lose some matching in the last pay period. Numbers Man Posted December 20, 2006 10:15 AM
• Wow. The power of the pen never ceases to amaze me. Thanks folks for all the responses. But, okay, I really must be dense. “Numbers Man” came the closest with the calculator but it didn’t seem anywhere near accurate enough for my needs. It just didn’t seem flexible enough or didn’t require sufficient information for the variables. It seems to me that the minimum information required for such a calculation must take into account the government’s matching contribution and therefore must include your annual expected income. E.g. Let’s say I make $60,000. Then I think my matching fund maximum should be 60,000 times 0.04, or $2,400. Then the next set of variables would be my age which would determine my goals if trying to maximize my contribution. So, am I in the category of under 50 or 50 and older? That gives me the possible maximum goals of $15,500 or $20,500. Regardless, the most the government will match is the $2,400 for a $60,000 income. So, if I subtract the $2,400 from $15,500 or $20,500 and I would end up with $13,100 or $18,100 as my maximum contribution, supposedly without losing matching funds. Divide those figures by 26 and I get $503.84 or $696.15. This is a far cry from the figures being passed around by the TSP board. If my numbers are accurate, using anywhere near their figures will automatically disqualify you from matching funds. Or is that their intent? Now all this is presumptive on the government making equal installments of the matching funds over the year. I have no clue as to that. Perhaps they match it all up front to the first $2,400 and then stop. That would mean the maximum government contribution was made well before the limits were met and your personal contributions would be the only thing stopped upon reaching the limit. I’m clueless here. Any finance types out there to correct my figures and thought process? “Numbers Man?” Tip off. GovExec.com reader Posted December 18, 2006 7:51 AM