Welcome to TSP Strategies

Welcome to TSPstrategies.com! This Web site is dedicated to exploring the benefits of saving and investing in the Thrift Savings Plan.

The companion book, TSP Investing Strategies: Building Wealth While Working for Uncle Sam, lays out a simple set of strategies for long-term, buy-and-hold investors to consider while investing in the TSP. This Web site and accompanying blog will build on those concepts, while focusing on new investing options and developments related to the TSP.

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Category: Long-Term Investing

Aug


22

Market Fundamentals as ‘Market Timing’?

There was an excellent article in the back pages of today’s Wall Street Journal titled “Yes, You Can Time the Market.” It detailed a method of determining when market fundamentals are too frothy, and how to re-adjust one’s stock holdings versus bond holdings.  The author focuses on the Shiller P/E ratio for the S&P 500, which currently stands at a rather high 26.31. For comparison’s sake, right before “Black Tuesday” in 1929, the ratio stood at 30, while during the … more

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Jul


23

C Fund Millionaires

The C Fund has recently produced a lot of millionaire TSP participants. Those TSP participants who started investing in the C Fund at its inception in 1988 have become or are close to becoming millionaires this year. Those who contributed enough from pay that, together with the government match, was the equivalent of the maximum deferral limit each year are now millionaires: In 1988, the deferral limit was just over $7,300, and by 2000 that limit had grown to  $10,500. … more

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Jun


24

The Unintended Consequence of Higher FERS-FRAE Payments

Did you experience a 3.6% pay cut this year? Those who just began their civilian federal government service this year did, probably without even knowing it. You’ll recall that lawmakers mandated an increase in contribution rates from new employees’ salaries to pay into the FERS retirement system. The new revised retirement system – “FERS-FRAE” or “FERS Further Revised Annuity Employee” – now requires a payment of 4.4% of new employees’ salaries into the system.  The 3.6% figure represents the difference … more

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Mar


03

TSP Diversification the Warren Buffett Way, and Alternatives

Warren Buffett, of course, is known for his investments in and purchases of individual companies.  His Berkshire Hathaway holding company owns over 80 businesses outright and has substantial investments in the stocks of over 100 others.  As the company’s largest shareholder, he is also ranked fourth on Forbes’ list of billionaires.  He didn’t build his wealth by investing in index funds, but amazingly enough, he suggests that you and I should consider doing so. His Berkshire Hathaway annual letter to … more

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Jan


30

MyRA, Roths and the TSP

The president today signed a Presidential Memorandum directing the Secretary of the Treasury to develop “a new retirement savings security that can be made available through employers to their employees” and that offers “a low minimum opening amount…while earning interest at a rate based on yields on outstanding Treasury securities.” While not stated explicitly in the memorandum, the new “savings security” will have the same return as and function similarly to the G Fund.  The program has been termed “myRA,” … more

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Jan


27

The TSP’s ‘No-Name Nor’easter’…

One of the primary competitive advantages of the Thrift Savings Plan is the rock-bottom costs (expense ratios) we pay to keep our money invested in the stock and bond market funds. At around .02% of each fund, this amounts to about $2 in fees for every $10,000 invested in the TSP funds.  The average expense ratio of all other mutual funds was just over .9% in 2012, according to Morningstar.  This would cost the investor $90 for every $10,000 he … more

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Aug


24

Ready To Live to 100? Vanguard Thinks We Should Be

Vanguard, the mutual fund company founded by Jack Bogle, earlier this month published an interview on longevity with two retirement experts.  Titled “Ready to live to 100? Here’s why you should be,” the participants discussed the positive and negative aspects of longevity, the need for a “culture of saving,” and the risks of outliving one’s life savings. In one interesting exchange, one of the experts notes that many people “assume that Social Security and Medicare will continue as they are, … more

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Jul


30

August Annuity Rate Highest in Two Years

TSP annuity rates have climbed slowly since March, from the historically low 1.75% to 2.625% in August.  Here is the trend over the past twenty-four years: The 2.625% is still very low, to be sure, but it is a positive trend.  It could be a slow-moving one since the Fed wants to keep rates at “exceptionally low” rates until unemployment drops below 6.5% into 2014. The annuity rate is still lower than many mainstream dividend-paying investment funds, which could serve … more

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Jun


18

How To Avoid Investment Scams – a Convicted Felon Comes Clean

Bernie Madoff perpetrated one of the largest Ponzi schemes in history, with losses totaling between $50 and $65 billion.  He was convicted in 2009 and sentenced to 150 years in prison. In a recent interview from prison, Madoff shared how not to be taken in by a Ponzi scheme.  When asked where investors should put their money “with the least amount of risk for fraud,” Madoff answered: “The best chance for the average investor is to put money in an … more

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Jun


12

My Extended Medical Hiatus: A Reality Check on HDHPs/HSAs

I went on paternity leave a few months ago following the birth of our son.  Even before his birth, my wife and I had already visited the hospital facilities over a dozen times to check on his in-utero development, meet with potential pediatricians, check on things like car seat adjustments and to take CPR training.  I thought the birth of our son would be the only medical event of the year for us, but I was wrong. Within weeks of … more

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Apr


21

Et Tu, Brute? The Very Real Legislative Challenges to Tax-Preferred Treatment of TSP Accounts

A budget proposal earlier this month raised the possibility of limiting the total amount that can be saved in TSP accounts, along with other tax-preferred accounts such as Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs). One of the original, guiding principles of tax-preferred accounts such as the TSP (and including others such as 401(k)s, 403(b)s, and IRAs) is that workers should have the ability to save and invest some of their wages in ways in which wages are … more

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Mar


18

FINRA Investor Alert and the F Fund

The Financial Industry Regulatory Authority (FINRA) issued an “investor alert” last month discussing the risk of bonds in a potential rising interest rate environment, particularly long-term bonds. As TSP investors know, the F Fund is based on the “Barclays Capital U.S. Aggregate Index,” which is a total U.S. bond market index fund.  Thus, FINRA’s investor alert relates directly to F Fund investors. Perhaps the most important paragraph of the alert was the following: “Currently, interest rates are hovering near historic … more

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Mar


16

The TSP and Facebook

Interested in investing some of your TSP savings in Facebook?  Or would you rather avoid it like the plague? In either case, take a look at the S Fund.  Facebook is the sixth-largest holding in the S Fund as of February 28th.  The S Fund is based on the U.S. Completion Total Stock Market Index, and as the name suggests, the publicly traded companies in the U.S. (like Facebook) that are not included in the C Fund – which is … more

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Mar


10

Maybe 150 Isn’t So Far-Fetched After All…

According to the UK’s Mail Online, “Drugs that could combat ageing and help people to live to 150-years-old may be available within five years.”  Read the full article here. Maybe living to 150 in our lifetimes isn’t so far-fetched after all…!

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Mar


04

Charitable Gift Annuities as Alternatives to the TSP-Sponsored Annuity

A new annuity rate was posted to tsp.gov on Friday.  The rate rose slightly from 1.75% in February to 2% this month.  The 1.75% annuity rate, first reached in August, was the lowest on record. The slight increase in annuity rate reflects the slight rise in interest rates over the past two months.  The mid-February U.S. Treasury 10-Year Note offered a median yield of 2.01%, for example. But already in the past week, rates have begun to fall again.  The … more

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