All TSP returns were up in August. So far in 2024, all Funds in the Thrift Savings Plan (TSP) have provided higher returns for investors.
Earlier in the month, the possibility of another positive month of stock market gains was not promising. A jobs report early in the month was unsettling, and stocks headed down.
That downward trend did not last. When the monthly inflation report was issued, the consumer-price index was up 2.9% from a year earlier. This was the lowest reading since 2021 and slightly below an expected increase of 3%.
Inflation Report Lowers 2025 COLA Estimate
The inflation report buoyed investors’ hopes, as it may indicate a near-term cut in inflation rates by the Federal Reserve.
The lower reported inflation will also impact the COLA and Social Security payments for 2025. The Senior Citizens League’s latest estimate of the 2025 COLA that impacts the income for retired federal employees (and Social Security payments) is 2.57%—down from the 3.2% COLA this year.
So far in 2024, the S&P 500 is up 18%. The C Fund is based on this index, but its returns are even higher, showing a yearly return of 19.50% at the end of August. The I Fund comes in second with a return of 12.30%. This year’s lowest return has been in the G Fund, with a positive return of 2.97%.
This chart displays all of the TSP Funds returns after the closing of the markets in August.
TSP Returns for August and Year-to-Date
| Fund | August Return | 2024 Return |
|---|---|---|
| G Fund | 0.35% | 2.97% |
| F Fund | 1.43% | 3.14% |
| C Fund | 2.42% | 19.50% |
| S Fund | 0.25% | 9.99% |
| I Fund | 3.15% | 12.30% |
| L Income | 0.98% | 6.25% |
| L 2025 | 1.10% | 7.16% |
| L 2030 | 1.69% | 10.64% |
| L 2035 | 1.82% | 11.38% |
| L 2040 | 1.93% | 12.12% |
| L 2045 | 2.04% | 12.75% |
| L 2050 | 2.13% | 13.38% |
| L 2055 | 2.38% | 15.58% |
| L 2060 | 2.38% | 15.59% |
| L 2065 | 2.38% | 15.59% |
| L 2070 | 2.39% | N/A |
How Risky is the Stock Market Now?
Mark Hulbert is a columnist covering the stock market for MarketWatch. He recently commented in an article: “Notwithstanding the S&P 500’s record string of quarterly sales growth, the stock market’s longer-term prospects are bleak.”
No one can accurately predict the future of stock prices over a short-term period. Over a longer time frame, stocks have historically provided investors with a good return on their investment.
This is why there is a higher percentage of stocks in Lifecycle Funds designed for employees who are likely to retire years into the future. For those employees who are older and will retire sooner, or for those who are already retired, the time frame for stocks to provide a favorable return to provide a higher income in retirement is much shorter.
Articles with titles like the recent article “Any Way You Look At It, the Stock Market is Dangerously Overvalued Now” mean the author does not think stock market returns will be favorable in the short term.
And, as one might imagine, he has a basis for his contention. Many stock market indicators of possible future performance are now at high levels. “[E]ach of these indicators [is] close to the bearish end of the spectrum, but each is almost as bearish as occurred at the market top in January 2022 — if not more so,” writes Hulbert.
This means there is a possibility of a drop in the stock market. Prices may still go higher for several reasons, including a drop in interest rates by the Federal Reserve or favorable events that buoy our optimism. The indicators warn investors that the risk of stock prices going down after a significant increase is higher than normal and that caution is warranted.
As always, if an investor is heavily invested in the market and sells these stocks, that investor will not share in the gains if prices continue to increase. It also means that investors will not lose as much if stock market prices fall.
For those whose retirement is years in the future, it probably will not make much difference as stock prices go higher over time, and guessing on the short-term performance of stock prices often results in an investor losing more than he is gaining. An investor must get it right on both ends to make a profitable trade: when to sell and buy stocks at the most opportune time. That isn’t easy.
What Are TSP Investors Doing With Their Investments?
The latest report from the Federal Retirement Thrift Investment Board (FRTIB) shows that in July, more than $1.4 billion was transferred into the C Fund. $703 million was transferred out of the S Fund, and $423 million was transferred out of the G Fund.
This is a great deal of money. But, to put it in perspective, the TSP had $927 billion in assets at the end of July. This indicates most TSP investors are not chasing the latest returns but leaving their money their selected Funds without reacting to the latest headlines about the direction of the stock market.
Here is a comparison of how TSP investors have allocated their money from December 2021 – July 2024. This chart shows how the funds have gained or lost popularity, largely due to the ebbs and flows of the stock market.
| 12/31/2021 | 12/31/2022 | 12/31/2023 | 7/31/2024 | |
| G Fund | 26% | 33.1% | 27.7% | 24.7% |
| C Fund | 33.1% | 28.9% | 32% | 35.3% |
| S Fund | 11.2% | 8.9% | 9.8% | 9.4% |
| L Funds | 22.8% | 22.9% | 24.3% | 24.8% |
2022 was not a good year for the stock market. The C Fund was down -18.13%, and the S Fund was down -26.26%. Between the end of 2021 and 2022, the G Fund grew more than 7% as a percentage of participant allocation into each TSP Fund. At the same time, the C Fund dropped more than 4% in the percentage of Funds receiving money from TSP investors.
As noted in this article, the stock market has done very well in 2024. As the bull market continues, TSP investors have been putting more money into the C Fund. Some will have delayed putting their money into it until well after the bull market was underway. When the C Fund drops again, as it did in 2022, some of these investors who were late to the party will get burned and lose money as the Fund starts to drop.
At the same time, an increasing percentage of TSP investors are investing in the Lifecycle Funds, whether the market has gone up or down. These investors are presumably taking advantage of a balanced portfolio projected to be appropriate for their retirement date. Those who are retired or close to retirement have a larger percentage of their investments in bond funds and less in stocks. Younger investors using the L Funds have a larger percentage of their money in stock funds.
Enjoy the ups and downs in the stock market—especially in a month when your future retirement income has gone up with the stock market.
