The G Fund

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Moose
Posts: 10
Joined: Tue Sep 25, 2012 12:58 pm

The G Fund

Post by Moose »

Greetings,
I am retired and heavily into the G fund. With the Fed increase last year and the Jan G fund at 2.125, why did it fall in February and then again this month (1.75%)?
moose :shock:

crondanet5
Posts: 4330
Joined: Tue Aug 19, 2008 8:51 pm

Re: The G Fund

Post by crondanet5 »

If you are retired you should roll your TSP Account balance out of the TSP into a rollover IRA account so you can access your money when you need it (pay taxes). You can then invest it in an ETF that approximates the TSP Fund you like. TSP was a vehicle to allow you to put aside money for old age-- above 75 years so you can pay your expenses. It is not a good investment vehicle because of its IFT limitations and the difficulty in withdrawing funds from it when you need them. Many tout the cheap fees, but that's plain silly when you look at the rate of returns for good investment funds. Ask if you need help doing this important action to secure your financial retirement.

Buckeyedog
Posts: 108
Joined: Thu Feb 28, 2013 2:42 pm

Re: The G Fund

Post by Buckeyedog »

Moose, where are you getting your data? The G fund did not fall 1.75%. Go to the official TSP site and check out the returns.

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rcozby
Posts: 341
Joined: Mon Aug 11, 2014 12:14 pm

Re: The G Fund

Post by rcozby »

Moose - 3 points to consider:

1. If you move your TSP funds to a brokerage account and make withdrawals prior to age 59.5, you'll pay a 10% penalty in addition to taxes. Not so if you withdraw from the TSP.

2. The G Fund interest rate is based on the market value of US treasuries, not the Fed funds rate. You'll note, for example, that the interest rate on the 10-year bond has gone down since the Fed raised their overnight deposit rate (for fear that the Fed would cause a recession) and so the G Fund followed right along.

More specifically, "G Fund securities earn a statutory interest rate equal to the average market yield on outstanding marketable U.S. Treasury securities with 4 or more years to maturity. The G Fund rate is calculated by the U.S. Treasury as the weighted average yield of approximately 125 U.S. Treasury securities on the last day of the previous month. The yield of the security has a weight in the G Fund rate calculation based on the amount outstanding.
(The larger the dollar amount of a security outstanding, the larger its weight in the calculation.) The Treasury securities used in the G Fund rate calculation have a weighted average maturity of approximately 11 years." (https://www.tsp.gov/PDF/formspubs/FundG.pdf)

3. "The G Fund rate calculation results in an intermediate-term rate being earned on short-term securities. Because intermediate-term interest rates are generally higher than short-term rates, G Fund securities usually earn a higher rate of return than do short-term marketable Treasury securities." In other words, it's virtually impossible for anyone in the private sector to match the G Fund's cost/risk/reward proposition, even at the currently low rate of return.

Best wishes in retirement!

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evilanne
Posts: 2067
Joined: Thu May 14, 2015 6:52 pm

Re: The G Fund

Post by evilanne »

The only way the amount in your G Fund account could decrease is if you are making withdrawals. TSP pulls withdrawals from all Funds proportionately. I'm not sure what will happen if the FED goes to negative rates in the future, however, currently that is not the case.

I don't suggest you pull out of TSP, as it has lower expense ratio than any option outside of TSP. The ability to withdraw without penalty prior to age 59.5, however, is not exclusive to TSP. It is is based on IRS rules for IRAs that TSP parallels. Generally, the only way to do so without penalty prior to 59.5 is to base your withdrawals on IRS life expectancy tables unless another exception applies. See TSP & IRS urls below. TSP = qualified plan & "equal payments" is based on Life Expectancy Factors based on the age when you elect withdrawals.
https://www.tsp.gov/PlanParticipation/L ... count.html
https://www.irs.gov/Retirement-Plans/Pl ... tributions

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rcozby
Posts: 341
Joined: Mon Aug 11, 2014 12:14 pm

Re: The G Fund

Post by rcozby »

evilanne,

TSP is based 401K rules, which are different from IRA rules. You can in fact withdraw funds from the TSP as early as age 55 without penalty as long as you've separated from federal service, and they don't have to be based on a life expectancy stream, although they can be if you want. You can also take a lump sum or equal monthly payments. Otherwise, no one would be able to retire at their minimum retirement age. I'd cite my source but it's the same one you cited. :o

Also, I don't think moose was referring to a loss, but rather to a lower interest rate than in previous months. If annualized, the G Fund rates for Dec and Jan were about 2.15%, but in Feb it was 1.8% due to the way the G Fund rates are calculated as described above.

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rcozby
Posts: 341
Joined: Mon Aug 11, 2014 12:14 pm

Re: The G Fund

Post by rcozby »

evilanne,

It just occurred to me that I was speaking from a FERS perspective. There's also a military perspective (I'm both, so I understand), where the concept of MRA and 401(K) doesn't apply. In that case I believe you are correct.

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evilanne
Posts: 2067
Joined: Thu May 14, 2015 6:52 pm

Re: The G Fund

Post by evilanne »

I don't understand why many people here recommend withdrawing funds from TSP when it is a very low cost investment option and relatively easy to manage and switch between funds. My main point was that the rules applicable to TSP/most employer plans and IRAs are very similar, fundamentally base on Tax laws. Moose's question was why G Fund lost money, which is not possible. I have no idea what age he is or if any of the comments above are relevant to his situation.

You can withdraw $$$ prior to age 55 also as long as you are 50 or older, but only if you do it based on IRS life expectancy tables (assuming other exceptions do not apply). I just retired under VERA/VSIP and I can choose to start receiving payments from TSP once they have received notification from my agency. If I roll it over to an IRA (which I will not do), I could still obtain payments based on life expectancy from the IRA or I could purchase an annuity that would not be subject to any penalty either. The amounts withdrawn/received will be taxed as ordinary income as all my contributions are traditional. I don't know about the military, but there is an exception for reservists called to active duty for period of 179 days or longer. See sections "No Additional 10% Tax" in topic links below:
Topic 558 - Additional Tax on Early Distributions from Retirement Plans Other Than IRAs:
https://www.irs.gov/taxtopics/tc558.html &
Topic 557 - Additional Tax on Early Distributions from Traditional and Roth IRAs
https://www.irs.gov/taxtopics/tc557.html
For more information you would need to look at the actual IRS publications.

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Moose
Posts: 10
Joined: Tue Sep 25, 2012 12:58 pm

Re: The G Fund

Post by Moose »

To all who responded to "The G Fund" thanks. rcozby had it right, I was referring to the monthly G fund earning rate that I thought was directly related to the monthly loan rate which is 1.75% for March. I had hopes that the loan rate would go from 2.125% (Feb) to something greater.
moose

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evilanne
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Joined: Thu May 14, 2015 6:52 pm

Re: The G Fund

Post by evilanne »

Moose, why would you want the loan rates to go up?

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evilanne
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Joined: Thu May 14, 2015 6:52 pm

Re: The G Fund

Post by evilanne »

Moose, why would you want the loan rates to go up?

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sunny2012
Posts: 42
Joined: Tue Mar 06, 2012 8:13 am

Re: The G Fund

Post by sunny2012 »

Has the G Fund ever gone negative?
I'm just making this up as I go along.

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Aitrus
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Joined: Mon Aug 06, 2012 5:03 pm

Re: The G Fund

Post by Aitrus »

Not since it came into existence in 1988.
Seasonal Musings 2022: viewtopic.php?f=14&t=19005
Recommended Reading: http://tspcenter.com/forums/viewtopic.php?f=14&t=13474
"It's not what happens to you, but how you react to it that matters" Epictetus

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Fund Prices2024-03-28

FundPriceDayYTD
G $18.15 0.05% 1.05%
F $19.08 -0.06% -0.74%
C $82.21 0.11% 10.55%
S $82.43 0.30% 6.92%
I $42.57 -0.24% 5.95%
L2065 $16.38 0.02% 8.37%
L2060 $16.39 0.02% 8.38%
L2055 $16.39 0.02% 8.38%
L2050 $32.73 0.01% 6.95%
L2045 $14.91 0.02% 6.58%
L2040 $54.38 0.02% 6.22%
L2035 $14.34 0.02% 5.79%
L2030 $47.67 0.02% 5.38%
L2025 $13.15 0.03% 3.43%
Linc $25.61 0.03% 2.82%

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