Third Consecutive Year of High TSP Returns
This means the C Fund provided Thrift Savings Plan (TSP) investors with a return of 28.68% in 2021. This is the third consecutive year of significant positive returns for the C Fund. In 2020, the C Fund had a return of 18.31%. And, in 2019, it provided a return of 31.45%.
Investors in the C Fund were not the only TSP investors coming out ahead in the past year. The S Fund had a return of 12.45% and the I Fund had a return of 11.45%.
For those who closely track their investments, the S Fund finished ahead of all others in 2020 with a return of 31.85% and a return of 27.97% in 2019.
Best TSP Returns Among Lifecycle Funds
For those in the TSP who use the L Funds, 2021 was also a very good year for improving your TSP balance. The Lifecycle Funds with the highest returns were the most aggressive funds as their percentage of stocks in the account is the highest.
This means the L 2065, L 2060, and L 2055 provided investors with the best annual returns (19.90%). The L 2050 had an excellent return of 16.34% and the L 2045 returns 15.4%.
For more conservative investors, note that the G Fund (often considered the safest TSP Fund) had a return of 1.38% for the year. The L Income Fund, which also includes some stock investments, had a much better return than the G Fund. The L Income return in 2021 was 5.42%.
99,000 TSP Millionaires
Looking at these TSP returns over the last several years, it is easy to see why there were almost 99,000 TSP participants with at least one million dollars in their TSP accounts at the end of October 2021. That number is likely to go even higher as of December 31st.
TSP Returns for December and 2021 Returns
Here are the TSP returns for all of the TSP Funds for December and for all of 2021:
|||G Fund||F Fund||C Fund||S Fund||I Fund|
|||L Income||L 2025||L 2030||L 2035||L 2040|
|||L 2045||L 2050||L 2055||L 2060||L 2065|
2021 Was Tumultuous Year—and TSP Returns Rewarded Those With Patience
Investors had a few opportunities to panic during the year. Human nature being what it is, there were undoubtedly some investors who saw their investments go down in some months and sold some of their TSP stock funds in an attempt to avoid any further drops if the market tanked.
The C and S Funds dropped in November and September. The C Fund dropped more than 1% in January 2021. A drop in the first month of the new year may have scared some investors who may have been thinking 2021 was not going to be a good year for their TSP.
The S Fund dropped more than 5% in November, 4% in September, more than 1.2% in July, down in May less than 1%, and also showed a negative return in March. But, for the year, the Fund provided patient investors with a return of 12.45%—despite the down months.
Rewarding Patience and Dampening Emotions
In the midst of a panic about COVID-19 infections, closing schools, closing stores, mandating vaccines via presidential executive orders, and creating a large workload for the judicial system, and the highest rate of inflation in almost 40 years, the stock market has carried on. No doubt, those who reacted quickly to the latest headlines and panicked by selling their stock investments lost money in the stock market.
Those that held on, and perhaps added to their investments upon hearing bad news, fared very well. That does not always happen, but long-term investors usually come out ahead.
For federal employees investing in the TSP, this provides them with a much richer retirement after turning in the federal employee identification cards as their TSP investments will provide a greater financial cushion during retirement.
Low Annual Salary Increase Offset by TSP Returns
A number of FedSmith readers have commented on articles regarding the annual average raise for the General Schedule of 2.7% that goes into effect this month.
The 2.7% 2022 federal pay raise is well below the annual rate of inflation for the year. While the annual raise is not a cost-of-living adjustment, the low raise obviously irritates many readers.
On the bright side, we hope that these same readers have substantial investments in the TSP. The excellent returns provided by the TSP in recent years will help provide more financial security after retirement. Those who panicked and sold stocks, and also may be complaining about low annual raises, have lost ground in securing their financial future.