G-FUND: Treasury unable to fully invest the G-Fund due to the debt ceiling.

[coastalite]

[FONT=&quot]Just got an email from the TSP about the G-Fund:[/FONT][FONT=&quot]
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[FONT=&quot][/FONT][FONT=&quot]G Fund and the debt limit[/FONT]

[FONT=&quot] [/FONT]

[FONT=&quot]As of today, March 16, 2017, the U.S. Treasury was unable to fully invest the Government Securities Investment (G) Fund due to the statutory ceiling on the federal debt. However, G Fund investors remain fully protected and G Fund earnings are fully guaranteed by the federal government. This statutory guarantee has effectively protected G Fund investors many times over the past 25 years. G Fund account balances will continue to accrue earnings and will be updated each business day, and loans and withdrawals will be unaffected.
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This seems to happen every year or two.

Thoughts?

 

[RazorCat]

One would think Congress would have the whole "statutory debt ceiling" thing down by now. It's not like the debt clock is going to get a meaningful rest any time soon.
Maybe stop spending so much of our money they don't have?
Time to step up Republicans.

 

[evilanne]

Maybe they are using G-Fund as float to pay bills until they up the debt ceiling!?!

 

[alevin]

Maybe they are using G-Fund as float to pay bills until they up the debt ceiling!?!

of course they are, or already did. Stockman Explains The Mystery Of The Treasury's Disappearing Cash | Zero Hedge

 

[coastalite]

I find it to be ridiculous that they seem to do this every couple years & then wonder why more and more folks choose to leave the TSP as soon as they are able...

Why pay the higher TSP fees AND be limited to ONLY 2 changes per month when you can roll your TSP over to Vanguard & pay considerably less in fees??? It's a no brainer to me.

Wife & I each have a ROTH at Vanguard & are diversified in a few of the top funds... such as the "total stock market fund" - the "admiral shares" version of the fund is only about .05% in fees, but we're paying around .35% for the TSP's fees (something like that).

Over time, the $$$ paid in FEES REALLY adds up.

I know from firsthand experience.

We were with "First Command" and were young & didn't realize they were not Fiduciary advisors. So, they set me up w/a "Franklin Templeton" ROTH & didn't realize we'd been paying absolutely outrageous fees to them for 10 or 15 years... We literally paid them tens of thousands of $$$ in FEES that were upwards of 1% or a little more, plus the little hidden "marketing" fees. We had no clue about fees. Okay, I am finished ranting. Thanks!

 

[Cactus]

I thought our TSP fees were less than that. On the TSP site it said our expense was 0.038% last year.

https://www.tsp.gov/InvestmentFunds/FundsOverview/expenseRatio.html

https://www.tsp.gov/PlanParticipation/BeneficiaryParticipants/administrativeExpenses.html

 

[RazorCat]

Coastalite,
TSP offers some of the lowest net expense ratio costs available. For 2016, the average net expense was $0.38 per $1,000 invested.
I, as many TSP participants, agree wholeheartedly that the 2 IFT limitation is well, limiting. 1 or 2 more monthly IFTs would provide numerous options for active TSP traders. But, the TSP board won't change it any time soon. Their stance is that TSP is a retirement fund, not a mutual fund, that's to be treated as one component of government retirement. They, the board and Greg Long, prefer TSP participants who pick a fund and camp out in it for the long term. Sort of a "save you from yourself" attitude.
They're not too fond of active traders. (And we're not too fond of them). There will eventually be additional TSP investment fund options offered in the future. But, the time it takes Long and the Board to make a decision is about as long the gestation period for Elephants (or longer).
On the other hand, TSP is one of few investment vehicles that offer an option like the G fund where you can safely park your assets during market downturns, yet still generate some sort of return. The trade-off is, there isn't much fund variety.
Best thing you can do is decide what percentage of your overall investment strategy TSP will comprise. Personally, I left about 40% in TSP, and moved 60% to a self-directed IRA when I retired. It's worked well for me so far.
Find something that fits you, and your needs. That's all you can do. Good luck.

 

[evilanne]

There are quite a few websites that will allow you to compare different brokers and their fees. e.g. Compare Online Brokers - StockBrokers.com & https://www.thestreet.com/online-trading/compare-best-online-brokers.html

Each mutual fund or EFT have fees or expenses that are outlined in their prospectus, which is in addition to any transaction or sales fee to purchase or sell Prospectus Definition | Investopedia Many of the discount brokerages allow you free trades for certain EFTs, however, there is generally a minimum holding period of 30 days, or you will be charged a frequent trading fee or penalty e.g. https://www.fidelity.com/etfs/ishares

Note: A short-term trading fee of $4.95 will be charged for any sales that occur within 30 days of the original purchase of the ETF with the oldest shares in the account being depleted first. The fee for shares sold on FAST, Fidelity's automated phone system, within 30 days of purchase is $12.95.

So even with a discount brokerage, you don't have unlimited trades without additional fees. If you rollover to full service brokerage for someone to actively manage, be aware that you will most likely end up in a fee based account that will charge you an annual percentage of the value of your account once they fully implement DOL rule for retirement accounts, which makes them a fiduciary.

 

[coastalite]

I thought our TSP fees were less than that. On the TSP site it said our expense was 0.038% last year.

Hi Cactus.

I found the TSP's April 2016 Highlights PDF... and on page 2 (it's showing 2015's TSP expense fees)...
they list:

1) "net" fees;

2) "gross" fees

3) additional "Other Expenses" fees (which appear to be similar to 12-b1 "marketing fees" that are common in the industry)


I don't know how they're getting their numbers... if you look at the "S fund" 2015 fees (for example), it says there's a "net fee" of 0.029%... but, there's also an additional "Other Expenses" fee of 0.038%.
So, was it 0.029% in total fees for the S fund in 2015, or was it 0.029% + 0.038% of additional "Other Expenses"?

https://www.tsp.gov/forms/newsletterArchive.html
Check out the April 2016 newsletter for a PDF of the inserted image.
View attachment 40950

 

[RazorCat]

The S fund had administrative and securities lending fees totaling 0.067%.
I had read that once before about TSP, but I guess it didn't register.
Good information for those that aren't aware. Good catch coastalite.
1 Net administrative expenses are the expenses charged to TSP participants per dollar invested in the respective funds after o setting gross administrativeexpenses with account forfeitures and loan fees.






Other Expenses:
2 Fees associated with securities lending are not included in 2015 administrative expenses. Consistent with standard practice in the industry, they are charged inaddition to administrative expenses. e other expenses represent fees paid to the investment manager for administering securities lending programs. Incomeearned from these programs improved the returns of the funds.

 

[James48843]

Note:

Just in case anybody missed it- we are ONCE AGAIN beyond the DEBT CEILING, which means good ol'e Secretary of the Treasury Steven Mnuchin is taking our G fund money in order to pay U.S. Government debts.

This is on the TSP Website now- and has been since December 13- :

G Fund and the debt limit — (December 13, 2017) As of today, December 13, 2017, the U.S. Treasury was unable to fully invest the Government Securities Investment (G) Fund due to the statutory ceiling on the federal debt. However, G Fund investors remain fully protected and G Fund earnings are fully guaranteed by the federal government. This statutory guarantee has effectively protected G Fund investors many times over the past 25 years. G Fund account balances will continue to accrue earnings and will be updated each business day, and loans and withdrawals will be unaffected.

Of course, they tell us it is nothing to be concerned about.

However, I would point out that we haven't heard ANYTHING out of Congress about raising the debt ceiling, and so I am thinking it's going to be a factor again when we next hit an expiration of funding on January 19th. Will they also fix the debt ceiling then? Let us hope so.

Enjoy.

 

[RazorCat]

It’s happened repeatedly in the past. 5 times under the previous administration. Unless the government violates the “make whole” provision if the law investments in the G fund are completely safe. You lose nothing. One can always move their money to F or one of the other funds if they take issue with the Treasury’s use of G funds.
https://www.fedsmith.com/2017/08/16/g-fund-debt-ceiling/

[FONT=&quot]The TSP has weighed in at times in the past and notes that there is a “make-whole” provision, meaning TSP participants invested in the G Fund will not lose anything. The TSP issued a statement covering this in detail in 2011, for example. This is a relevant portion of the statement they issued at that time:[/FONT]

The make-whole provision means that TSP participants who have invested in the G Fund will not lose anything. The G Fund account balances would be exactly the same from day to day as if they were invested in Treasury securities. Furthermore, disbursements of TSP loans and withdrawals would not be delayed, nor would the amounts of those payments be reduced.
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