Time is running short for Congress to raise the nation’s borrowing limit — the Treasury Department says it will run out of spending authority by Feb. 27.
As the federal government keeps spending money it does not have without borrowing or printing more, the Department of the Treasury has announced that it will again be using “extraordinary measures” to keep the government afloat as the debt ceiling limit will again be reached. One of those extraordinary measures is to borrow money from the G-Fund.
The G Fund holds approximately 37% of all TSP balances held by the 4.6 million TSP participants. To make up for the deficit spending by the government, the Treasury has “suspended reinvestment” or taken assets out of the G Fund to pay for other expenses.
So what does the suspended reinvestment mean for your retirement? And is your retirement safe? Kim Weaver is the Executive Director of the Federal Retirement Thrift Investment Board. She told Chris Dorobek on the DorobekINSIDER program that feds shouldn’t be worried about their retirements at all.
“A default or the debt ceiling will have no effect on your G-Fund. The debt ceiling was hit on February 7th and we expect to get a letter from Treasury notifying us that the Treasury will begin suspending investments, to all or part of the securities in the G-Fund, today. But as is always the case, that has no impact on participants. The G-Fund is always made whole down to the penny once the debt ceiling issue is resolved. It has no daily effect on participants whatsoever. They can move money around, take their money out, do what they need to do. While this situation is not something that everyone is excited about, it has no effect on the TSP participants and they should take comfort in that,” said Weaver.
Your money is protected
“Protection has been in place since 1988. The Treasury has invoked this right time and time again and there have been no issues. The G-Fund has also been audited by GAO and by others to make sure that in fact the reconciliation is correct. It has always been replaced down to the penny. Our accountants and our financial guys would prefer this not to happen. But unfortunately in the last couple of years they have had some practice at it. So at this point it is something that we are well equipped to handle,” said Weaver.
January was a rough month for the TSP funds?
“January was not an up month. It was the first decline in equity prices in five months. The C-Fund was down 3.45%, S-Fund was down 1.9% and the I-Fund was down 4.03%. On the upside the G-Fund and the F-Fund were both positive. The F-Fund is long-term bonds. The G-Fund is the Treasury. However the C, S, and I-Funds are all up more than 10% over the last 12 months, so despite the fact that the funds were down in January they by no means erased the gains that those equities had made over the last year,” said Weaver.
Nervous investors should look to the L-Funds?
“We push the L-Funds as a way to help mitigate panic. It is a professionally designed, diversified portfolio and so while it may not always go up, you can be certain that it is diversified in a way that is going to serve you long-term,” said Weaver.