GovExec Daily:  The G Fund is Now the Biggest Core TSP Fund

Ad
From protecting against nation state attacks to complying with the executive order on improving the nation's security, it's more crucial than ever that U.S. agencies work to shore up their cyber defenses. So what will it take to protect government systems from increasingly sophisticated cyber attacks? Cybersecurity leader Trellix dives into this and their recent report, “Path to Cyber Readiness, Preparation, Perception and Partnership.” Check it out now on https://www.route-fifty.com/ to learn more about how your agency can stay one step ahead of today's threat landscape.

Ross Gianfortune
This is GovExec Daily, where we bring you the federal stories that really matter.  It's July 18, 2022 . I’m Ross Gianfortune.

The G Fund recently surpassed the C Fund as the largest among the five core funds in the Thrift Savings Plan. While the exact numbers from the most recent TSP Investment board meeting are not in yet, based on market performance, the G Fund likely holds between $215-$220 billion. The G Fund, because of the nature of it, can’t lose money while all the other funds have suffered losses.

But, the G Fund's makeup means that it is not as volatile as other funds. Many investors may seek it out for just that reason, but our guest today suggests that different strategies are needed for different investors. While the TSP web site suggests investing in the G Fund if an investor wants their money completely protected from loss, a time of increased inflation or a looking economic downturn may color the choices of those invested in the TSP. Depending on how close one is to retirement and what kind of retirement one wants, different strategies may be needed.

Dallen Haws is a financial planner and host of the Haws Federal Advisors YouTube channel and podcast. He is also the author of the book Building Wealth in The TSP: Your Road Map to Financial Freedom as a FERS Employee .  After a short break, he’ll join the show to talk about the G Fund and the TSP.

Ad
When a shiny new technology pops up when a newly discovered flaw exploits a bedrock legacy system when Congress and leadership demand modernization but won't provide more resources. When every update is critical. You need analysis that cuts through the noise to tell you exactly what you need to know during the NextGov team as we speak with relevant federal leaders and experts to break down the science, the tech, the policies and the people behind the latest emerging technologies. Subscribe in the Apple Store, Google Play or through your favorite podcast platform to make sure you get the latest Critical Update.

Ross Gianfortune
The G Fund is now the biggest amongst the five core Thrift Saving Funds funds. The fund has more than $200 billion invested in it. That’s a big deal, but what does that mean for TSP investors?

Dallen Haws is a financial planner and host of the Haws Federal Advisors YouTube channel and podcast. He is also the author of the book Building Wealth in The TSP: Your Road Map to Financial Freedom as a FERS Employee . He joins me now to talk about the G Fund and what TSP investors need to know about it.

Welcome back to the podcast.

Dallen Haws
Thank you, Ross. Always a pleasure.

Ross Gianfortune 
So the G fund is now the biggest fund officially in the TSP. What does that mean for the fund itself? And does it matter?

Dallen Haws
Yeah, it's a great question. And I chose to wrote about write about this, knowing that would get a lot of interest, but also knowing it doesn't matter as much as people probably think so actually, basically, the size of the fund just just shows how much money is in it. Now, what it means is a lot of federal employees have moved their money to the G fund. That's what it does mean, it also means the other funds have gone down in value, which anyone that's been investing in the last six months certainly know that as well. So, those are the two factors, a lot of people have moved to the G fund because of it safety at the same time all the other funds have come down. So the G fund has, you know, come on, come out on top at this point, right. So,

Ross Gianfortune  
so the C fund is the next biggest fund. How do the two compare and is there sort of important distinctions between them that investors should know

Dallen Haws  
Oh, yeah, yeah, no, they aren't. They're night and day. So the G fund it for those that aren't familiar with it, it is a government bond fund. So long story short, what that means in, in normal language is it's not going to lose money. It's the one fund basically, in the world that the government guarantees is not going to go down in value, which is awesome. So when people think like, what, why don't I just put all my money in the D fund, that sounds wonderful, it's not gonna lose money. The problem is, you're guaranteed to not earn money as well, especially after inflation, you're lucky to break even after inflation. So it's a great place for short term money that you don't want any growth on over time. It's a terrible place where if you want growth, and if you're working, even once you retire, you don't want all your money in the G fund, because retirement could be 2030 years, you want at least some of your money grown over time. And that's where the C fund and other funds that, yes, they're gonna bounce around more, but that's where you're gonna get the growth that you need. When you have 10%. You know, inflation, when you have these crazy things, where are you going to get that growth to beat that over time? A little bit, you need at least some of your money in the C fund things that are going to get that growth over time.  

Ross Gianfortune 
I want to get back to the G fund as it were. Because you wrote about it for our site, how should tsp investors approach the G fund, particularly right now, in this period, where it's the biggest fund? Is it different for people who are coming up to retirement, early career mid career? How should each career stage sort of approach this?

Dallen Haws
Yeah, yeah, so the career stage certainly matters. But in my opinion, what matters the most is when people are going to need their tsp money. Because when it comes to investing, that's the one big thing that we often know, and can base everything off of, for example, if we are 25. So early in our career, most people to hate, you need to be aggressive for the long term. But what if there was a some weird situation where you needed that tsp money for something short term, you wouldn't want to be investing that in something that's going to bounce around the same thing if you're about to retire. But you know, hey, once you retire your pension, and maybe your social security is going to cover enough for you for all your living, you don't need your TSP for 10 plus years, or maybe you're planning to use that, that money to pay for your kids college and however long or maybe you want to give it to your kids later, it all comes down to when you're going to need the money. And I know that's a lot of talk. But in a very practical way. If you need any money here in the next 567 years, that money should not be invested in something that is going to be bounced around like the C fund. So if you need money here in the next 567 years, the G fund may be a great fit for you. But if you don't need that money for six, seven plus years, the G fund is not a good fit. It's just not going to get you the growth you need over time. So it all comes down to when you need the money. And then to align how much you have in each of these things. Based on that. So you know, Ross, like you said, hey, what if someone's 30 years old, they're gonna work for another 25 years? Well, they don't need them. If they don't need the money for 25 years, that's a long time. You want to be basically giving as much growth as you can over that time. There's exceptions depend on some weird situations, people's life, but as a general rule, yeah, you're young in your career, you want to get growth, you want to stay out of the G fund as much as you possibly can to get the growth you need all the time. So

Ross Gianfortune 
So you mentioned inflation just a bit ago. So what's your sort of general impression of the TSP right now during this inflationary period? And how does the G fund sort of factor into that?

Dallen Haws
Yeah, I know it's a it's a good question. Inflation is kind of one of those things where we can't control it kind of like taxes, where we try to do our best to plan for it. But we can't control it. And it's just kind of one of those factors that we just do our best. It's just life, right? There's some things we literally just can't know for sure. She's plan and have a little margin in your in your retirement plan. So okay, if inflation is higher than we think it's going to be okay, we have some wiggle room here. So the G fund, often people run to it when the markets go crazy, like now, but yeah, my concern is okay, you know, the last 12 months inflation has been 10% prices, the price we're paying for things have gone up by 10%. The G fund has grown by, let's say two or three. So most people feel safe that, hey, I'm in the G fund, I'm good, but they've lost 7% After you take into account price rising, you know, now, the next thing I get is okay, well, the C funds lost 20%. Right? And so they're like, hey, based on that they you know, compared to the C fund, that G fund is doing phenomenal, it's true. That's why it all comes down to when do you need the money? And you have to have a long term view. If you view investing in how do I have the most money possibly in the next six months? Then you're just going to kill yourself over and over and over again. You have to okay, what's the goal is the goal to So just be safe now in the defined or is the goal to have an incredible retirement to have as much money and freedom later? Which one is it, you can't have both. You have to pick and you have to prioritize your goals and your investing based on what you're trying to do. And for most people, they're trying to optimize their retirement. And yeah, we'd love to have as much now to that sometimes you got to pick and pick an investment strategy that's going to optimize for you what you really care about.

Ross Gianfortune  
Prepare to fail or fail to prepare as the idiom goes, right? 

Dallen Haws
Yes, yes. 

Ross Gianfortune 
So we'll end on this just just because I have you here. I do want to ask about the sort of broader economic environment outside of inflation and the sort of looming threat of a recession should fed to be paying attention to that when it comes to the TSP. And should they? How much should they inflate in insulate themselves from the broader economic environment?

Dallen Haws
Yeah, no, it's a good question. It's a good question. And federal employees are in a semi unique situation, but not unique in other ways. So first, there's a degree of stability for some federal positions, which can be very nice as we go into recessions and things that it helps people especially emotionally get through these things. But when it comes to the TSP, now, okay, let me kind of break this into two pieces. If someone has a solid investment plan, that they are set up, and they know, hey, I'm going to stick to this long term, then no, they should just not do anything. It's okay. Ups and downs happen. I gotta ride this out, and they're gonna do phenomenally well over time. If someone doesn't have a plan, then yeah, get a plan in place as soon as you can. So that you can comfortably at least knowing you have a plan, get through these these ups and downs. If you don't have a plan, then it is scary. Get a plan first, and then let's ride through this and everything's gonna be okay.

Ross Gianfortune  
That seems like good advice. Certainly to me. Again, as I say a lot on this show with the caveat that I really am far from an expert but that's why we have you on and as such down thanks so much for being on the show this.

Dallen Haws
Yeah, always a pleasure.

Ross Gianfortune 
Thanks for listening to GovExec Daily. Our show was produced by Adam Butler and hosted by me, Ross Gianfortune. We want to thank Dallen Haws for joining the program. Our music is the song “Signals” by Catfish Dancing. Be sure to rate, review and subscribe on Apple Podcasts or Google Podcasts or wherever you get your podcasts. You can email us any feedback at podcast @ govexec.com or hit us on Twitter @ Govexec. 

We'd love to hear from you. 
We’ll talk to you later

https://www.govexec.com/pay-benefits/2022/07/govexec-daily-g-fund-now-biggest-core-tsp-fund/374565/