As economic and market news continues to out-shock the nation every day of the year, a recent update from the US Treasury Department may seem mundane but will in fact impact millions. According to FEDweek, “The Treasury Department has said that … it will disinvest the TSP’s government securities G fund as part of financial maneuvers to avoid hitting the debt ceiling.”
As savvy investors, you’ve heard of a Thrift Savings Plan (TSP). In case you’re not a savvy investor, note that this retirement investment program is designed for both federal employees as well as uniformed service members. The plan is similar to a 401(k) retirement plan or Health Savings Plan (HSA) offered to employees by their companies. As with many of these plans, a TSP offers a variety of benefits to the participants including savings tax breaks, tax-free Roth IRAs, and at least five investment fund types:
- C Fund – Common Stock Index Investment
- F Fund – Fixed Income Index Investment
- G Fund – Government Securities Investment
- I Fund – International Stock Index Investment
- S Fund – Small Capitalization Stock Index Investment
It is important to note that the TSP’s C, F, I, and S funds are called index funds, which are managed by the State Street Global Advisors Trust Company as contracted by a federal board that acts as a fiduciary. As with HSA’s, TSP’s come with some rules including a $22,500 (in 2023) contribution and a cap on the amount you can invest.
More About The G Fund
The G Fund, an investment in short-term US Treasury securities generally issued to a TSP, has a history of being an aggressive but somewhat safe investment. Today, the G Fund interest rate is 3.625%. According to The White Coat Investor, James M. Dahle, “The yield on the G fund is an interest rate calculated once a month from the average yield of all (nominal) US treasury securities with four or more years to maturity… the value of the principal never goes down, so it is a very safe investment.” Dahle goes so far as to say, “You can’t lose money with it, at least on a nominal basis.” With over 6 million US TSP participants investing over $800 billion in assets, this thrift savings plan is the largest retirement plan of its kind in the nation. That might explain why the Fed is focused here to solve their current debt ceiling problem.
How is FED Using Your Money?
As a federal employee or service member that is taking advantage of a TSP, it is likely you are invested in G Funds. As explained by FEDweek, “In disinvestment, the Treasury in effect takes the G fund off the government’s books as debt owed, freeing up an equivalent amount of money.” The articles goes on to state that Janet Yellen, Treasury Secretary, will manipulate civil service retirement funds and others (the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund) to “temporarily provide additional capacity for the Treasury to continue financing the operations of the federal government.” Essentially the government is using investor money, as much as $300 billion in G funds, to help with a problem they created. The method is not completely uncommon as it has been used a number of times in the past, but the negative economic impact is likely to be substantial.
The Debt Ceiling Debacle
While the government has been forced to raise the debt ceiling over 45 times in 40 years, the impacts are not taken lightly. The current debt ceiling—the max amount the Fed can borrow to finance pre-approved obligations—is currently at a whopping $31.4 trillion. Some of the repercussions in hitting the debt ceiling include: default on government-based program payments, a downgraded credit rating, increased borrowing costs (autos, mortgages, etc.), a threat to the value of the US dollar along with bonds and equities, and a resulting negative result for inflation leading up to a recession. Hitting the debt ceiling is an economic disaster thus the reason our government will pull rabbits out of hats to keep it from happening.
Control Your Own Assets
One message is clear. When you control your own assets, you are not under government reach. Most traditional assets are controlled by the government, but there are alternative options on today’s market. Precious metals are taking center stage as we continue to be manipulated by the Fed. This article is just one more important reason to get involved in non-government impacted precious metals and take control of your own assets. Finding a good balance for your retirement portfolio is a critical action you should take right now. Contact Reagan Gold Group (RGGUSA) today and consider a gold or silver investment to help you hedge against the impending inflation that is plaguing the country. There is new activity in the gold and silver market, and now may be the best time in your life to make such a move.