How did your retirement fare in 2013? What should you do in 2014? Insights on the TSP

New year, new financial priorities? Every year millions of American pledge to lose weight, hit the gym and save money. But retirement savings can be confusing and downright complicated, the Federal Retirement Thrift Investment Board is here to help.

Kim Weaver is the Director of External Affairs at the Federal Retirement Thrift Investment Board. She told Chris Dorobek on the DorobekINSIDER program that 2013 was a pretty good year for federal employee’s retirement accounts.

“If people had a nicely diversified portfolio they did quite well. Except for the F-Fund everything was up. The equity funds were up quite nicely. The C-Fund was up 32%, S-Fund was up 38% and the I-Fund was up 22%. Of course all of the L-Fund which are based off of the five funds we are also in the positive ranges as well. The F-Fund, made up mostly of corporate bonds, was down a little more than a point and a half,” said Weaver.

How does the L-Fund work?

“The L-fund becomes more conservative everyday. Once you reach retirement you automatically are put in the L-Income fund. So if you are uncomfortable in setting up your allocations the L-Funds are something people should look at,” said Weaver.

Could there be a change to automatic enrollment for new employees?

“Right now when a new federal employees signs up for the TSP, they can participate at any amount, in any fund that they want to. If they don’t choose a fund, they are automatically defaulted to a 3% contribution to the G-Fund. Most people do make other options. They choose different funds, or amounts to contribute. But we have noticed there is a group of employees who are defaulted in at 3% and who are sitting in the G-Fund. For most people having all of your money in the G-Fund is not going to get you where you want to be in terms of your retirement income. The G-Fund doesn’t grow very much but it almost never loses money. So the reason the G-Fund was the default, was when automatic enrollment was being considered back in 2009, there was a lot of market turmoil. People were rightfully concerned about defaulting people into a fund that would have risk. So the G-Fund became the default. But as we have watched this, we have had about 2.5 years of experience now with the automatic enrollment. The Board has determined that it is more prudent of us to default people to the age appropriate L-Fund. So we will be pursuing legislation on the Hill to make that change. I want to emphasize that this affects new employees that are coming in and they can opt out. They can choose whatever fund they want. We just want to guide people into what we think is the most prudent choice,” said Weaver.

Let’s talk financial resolutions!

“We mail annual statements to each participant. Those will be going out at the end of the month or early February. I really urge people to look at it. With the market growth the way your money is actually in your account may be different than the way you are actually contributing because the growth in the market has actually distorted that. Obviously the percentage growth in the equity funds far outweigh the growth in the G-Fund. So if in fact what’s in your account right now is not allocated the way you want this is a good time to make those changes. You also just need to be aware of where you are contributing. I think it is important that people have a good sense of where your money is going and how it is growing or not,” said Weaver.

You Should ask, ‘Am I on track?’

What will come on the annual statement, it will be right there on the front page, with your account right now, whatever the balance is, if we paid that to you in a monthly amount, pretending you were 62, this is what you would get. If that amount is something you are comfortable with, great, if it is less than what you thought it might be then this is a good time to think if you can eek out another percent or two in terms of contribution. Or do I need to change my contribution allocations so that my account grows the way I think is appropriate. I think that number is very helpful,” said Weaver.

How big is the TSP?
“As of the end of December, the TSP has 379 billion dollars in it. That is wicked chunk of change. The G-Fund has 172.6 billion and the C-Fund has 128 billion. The rest is distributed amongst the other 3 funds,” said Weaver.