For Federal Employees: What does the recent market performance mean for your retirement plans?

Despite the ongoing and much discussed economic concerns facing our country today the Thrift Savings Plan and broader market have performed well over the last 12 months. Here’s a chart from www.tsp.gov reflecting the performance of the available investment options as of May 18th, 2013.

Stocks, represented by the C, S, & I funds, have reached double digit returns while fixed income returned more modestly reflecting our low interest rate environment. The markets seem to be gaining confidence, buoyed by impressive housing data and the energy advancements taking place throughout the country. What does this mean for your TSP portfolio and larger retirement goals? Are we out of the woods and able to count on higher returns going forward? Regarding the second question I think we can all agree the markets will continue to be subject to volatility, global events, and eventual downturns. Analyzing one’s individual portfolio to assess progress toward their goals however is more difficult. How much is enough? What if enough at one point in time turns out to not be because of market losses during retirement when withdrawals are occurring simultaneously? Is less risk more appropriate as you get older to prevent downside exposure or arguably, should you take on more risk to account for the distributions to cover living expenses and keep up with inflation?

Whether these questions are asked of one’s TSP account or any other investment portfolio one approach is to have the answers fall back to the purpose for the asset. By purpose we mean how the funds will most likely be used going forward. Investment accounts can be earmarked for lifetime income immediately upon retirement, or perhaps later to provide a raise. They can represent a temporary use of funds until other sources kick in like pensions or social security, or until the house is paid off at which time they may not be needed any longer. Other investment assets may be considered specifically as an eventual inheritance, or are only to be used in the event of an emergency or long term care event. Many households, by the time they retire, will have several accounts identified by all of these potential needs and more, and therefore the investment allocation may be different within each one. What’s key here is being comfortable with these choices, monitoring them over time and getting a qualified second opinion when necessary.

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Securities offered through Triad Advisors, Member FINRA / SIPC.  Advisory Services offered through Planning Solutions Group, LLC.  Planning Solutions Group, LLC is not affiliated with Triad Advisors.  PSG Clarity is a division of Planning Solutions Group, LLC.