TSP Returns in A Volatile Stock Market
In April, the U.S. stock market elicited a range of emotions from investors. The market ended in April with seven consecutive days of gains. The S&P 500 index, on which the C Fund is based, experienced its largest percentage increase over seven straight market sessions since November 2020.
In early April, the stock market looked dismal. The scale of the tariffs was a surprise following the president’s tariff announcement on April 2nd, and the S&P 500 index dropped approximately 11% in three days of market sessions. It started recovering as news impacting the market turned more favorable with President Trump announcing a pause in reciprocal tariffs.
Here is a depiction of the wild April ride in stock market prices. This comparison illustrates how your TSP core funds performed from April 1 – April 21st and the performance of these same TSP Funds by the end of the month.
| Fund | April 1-21 | April 1-30 |
| F Fund | -1.32% | 0.39% |
| C Fund | -8.02% | -0.68% |
| S Fund | -8.31% | -0.78% |
| I Fund | -0.31% | 4.16% |
Anyone watching the daily returns of these TSP Funds may have experienced heart palpitations with the market rapidly gyrating. For most, this is probably a good reason not to sit at a computer and watch daily stock returns. Instead, step back and look at a longer time period to retain emotional stability.
TSP Returns in April 2025, 12 Months, and YTD
| Fund | April 2025 | 12 Month Returns | Year-to-Date |
|---|---|---|---|
| G Fund | 0.35% | 4.47% | 1.48% |
| F Fund | 0.39% | 8.00% | 3.18% |
| C Fund | -0.68% | 12.04% | -4.93% |
| S Fund | -0.78% | 5.64% | -9.65% |
| I Fund | 4.16% | 10.78% | 9.00% |
| L Income | 0.67% | 6.61% | 1.13% |
| L 2025 | 0.68% | 7.16% | 1.06% |
| L 2030 | 0.92% | 8.93% | 0.38% |
| L 2035 | 0.95% | 9.32% | 0.25% |
| L 2040 | 0.97% | 9.68% | 0.10% |
| L 2045 | 0.99% | 9.98 % | -0.04% |
| L 2050 | 1.00% | 10.26% | -0.18% |
| L 2055 | 1.01% | 10.91% | -0.82% |
| L 2060 | 1.01% | 10.91% | -0.82% |
| L 2065 | 1.01% | 10.92% | -0.82% |
| L 2070 | 1.01% | 3.33% | -0.81% |
How Do You Remember Stock Market Returns?
How do you react to the inevitable ups and downs in the stock market? If you are a young investor who is familiar with bitcoin investing and how markets reacted (both up and down) during the COVID-19 pandemic, you probably recall how quickly markets can fluctuate. That memory may influence your reaction to the stock market today.
If you are an older investor who invested from 1981 through early 2022, bond prices fell dramatically, while the stock market rose. As noted in this Wall Street Journal article, on September 30, 1981, the bond yield was 15.78%. One year later, yields were at 11.65%. By that date in 1986, the bond yield was at 7.55%. The yield dropped 50% in five years.
Over this same time, the S&P 500 stock index increased by approximately 95.5%. If you were a market timer and happened to be lucky enough to hit on this dramatic turnaround, you would have become very rich. Some people were smart or lucky or both. If you still avoid stocks, you missed out on an historic run.
If you lived during this era, this may be how you remember the stock market
On the other hand, my parents would never invest in the stock market. From the 1929 peak to the 1932 bottom in the stock market, the Dow Jones Index dropped about 89%. In five years, a decade’s worth of stock market gains and a devastating loss of investor wealth occurred.
My parents were children who lived through that and absorbed information about the devastation from their family members. They were terrified of investing in the stock market. This influenced their opinion during their entire lives.
FERS vs. CSRS and the TSP
I was working for the federal government when employees were given the chance to change to the new FERS retirement plan. In the 1980’s there were still many employees familiar with personal stories from relatives about the devastation of the stock market in the 1930’s. The topic of discussion in federal offices was “are you switching to FERS instead of CSRS?”
More than once, I heard about the dangers of putting retirement money in the stock market (think of TSP as a main retirement income source). Some thought it was an effort by Republicans to cut the federal government’s expenses and transfer the risk of retirement poverty to federal employees.
Probably because of this, only about 5% of eligible employees switched to FERS in 1987, and fewer than 2% switched in 1988. The 147,910 TSP millionaires at the end of 2024 would probably not hesitate to switch to FERS based on their experience in the stock market.
When FERS was being discussed as an option in the 1980’s, I never heard anyone mention any possibility of a federal employee becoming a millionaire under the new retirement system. It was often considered a more likely path to financial apocalypse.
That was based on what people knew and thought about stocks in that era.
Jason Zweig is a columnist for the Wall Street Journal and has an ability to synthesize long term events into advice for investors. For example, he wrote this last week:
The problem is that your memory bank can deceive you in dangerous ways. Your experience of the past is a reasonable guide to the future only if the future turns out to resemble the portion of the past that you’ve lived through. And it often doesn’t.
The stock market today may be undergoing a dramatic shift. Or maybe it will not be much of a change after all with the factors creating the volatility die down. Predicting the future is always difficult if not impossible.
Average Federal Worker is Older
The average federal worker is around 47. The average American age in 2023 was about 39. In September 2024, more than 19% of federal employees were between 60-64 according to FedScope.
We do not know how most TSP investors view the stock market, but about 96% of federal employees under FERS invest in the TSP. With the publicity about TSP millionaires and the fact that almost all current federal employees are now under FERS, rather than CSRS, their image of the stock market may be a little longer. They may recall the high interest rates of the 1980s and their impact on stock and bond markets, and how fast stock trends can change.
According to the TSP, only about 2% of TSP investors change funds using interfund transfers in a given month. The number has been increasing due to the current volatility in the stock market. We will likely see more TSP investors allocating a higher percentage of their investment funds to the G and F Funds in the near future. Depending on how stocks react to the fundamental changes now occurring under President Trump, volatility may increase, at least in the short term. The long-term investor will want to consider international funds as a harbinger of a new trend. It is also possible that American ingenuity will come to the forefront, and US stocks will enter a new period of increasing growth in the next several years if the federal deficit declines and Americans enter a new era of prosperity.
As usual, there are always predictions for or against the futures in the stock market. Long-term investors in the stock market usually experience good results unless emotions take over short-term investment decisions.
Long-Term Stock Market Returns
The advantage of the possibility of significant retirement income through the TSP is obvious with the number of successful TSP investors. No one knows what will happen in the near future, but long-term investors usually fare well.
From 1928 to 2023, the S&P 500 index has an average annual return of 9.8%, with dividends reinvested. Over rolling 20-year periods, the index has consistently posted positive returns, even during market downturns like the Great Depression and the 2008 financial crisis.
Good luck in predicting the future of the stock market with your investment decisions!
We wish all readers a successful investing experience!
