How to avoid TSP calamity if debt ceiling is not raised

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NigelSt.Hubbins

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This 2012 budget battle is only the opening salvo in the craziness to come, especially the raising of the federal debt ceiling. I have come to reluctantly conclude that the Republicans would be willing to totally undermine our fragile economic recovery if they think it is to their political advantage, so there is a fairly high chance that they will make unacceptable demands resulting in a failure to raise the debt ceiling.

Many financial experts have concluded that defaulting on federal debt would roil the world financial markets. Based on the last financial crisis, I could easily see the stock market taking a rapid 25% "haircut." My immediate questions are practical ones. As a retiree with most of my financial assets in my TSP (90% in various stock funds) where is the safest place (within the TSP) to redeploy these assets?

Do I need to move my funds outside of the TSP altogether to a different sort of investment to be really protected?

I am just trying to determine a prudent course given the reasonable possibility of something really "ugly" happening -- this strikes me as the wrong time to get greedy.

Thanks for any guidance anyone can provide!
 
Suggest migrating to the C fund and let the diversified S&P 500 take care of you. The only thing we have to fear is no fear.
 
I have come to reluctantly conclude that the Democrats would be willing to totally undermine our fragile economic recovery if they think it is to their political advantage, so there is a fairly high chance that they will make unacceptable demands resulting in a failure to raise the debt ceiling.
:)
 
NigelSt.Hubbins,

I would probably recommend the 'I Fund'. They are starting to make the hard decisions we are not. For example, the EU 'FED' has increased interest rates to head off inflation. Your stock funds will behave better than debt funds. And, the Treasury can raid your 'G Fund' assets to cover payroll for a short period of time. And, they will do so.

By the way, when we are going more in debt every month than 'W' went for all of 2006 we have problems that are not purely political.

Government HAS TO TAKE A HAIRCUT.

NOBODY is willing to pay us what we think we are worth.

We will have to cut about a Trillion make economic growth a feasible solution.
 
I have come to reluctantly conclude that ALL OF CONGRESS would be willing to totally undermine our fragile economic recovery if they think it is to their political advantage AND MONETARY ADVANTAGE, so there is a fairly high chance that they will make unacceptable demands resulting in a failure to raise the debt ceiling. we need to fire them all and get people in there that truely can change the way the government should be run. Some of the OLD Geasers need to go and get young enthusiastic blood in there(sorry if spelling is off)
 
It's going to be the new blood that demands the debt ceiling stays in place, quite a few of the old blood got kicked out at the last election (from both parties) on this very issue. Bringing in the new may bring in the change that some people thought they wanted and are going to really regret.

Beware what you ask for...
 
goforit said:
I have come to reluctantly conclude that ALL OF CONGRESS would be willing to totally undermine our fragile economic recovery if they think it is to their political advantage AND MONETARY ADVANTAGE, so there is a fairly high chance that they will make unacceptable demands resulting in a failure to raise the debt ceiling. we need to fire them all and get people in there that truely can change the way the government should be run. Some of the OLD Geasers need to go and get young enthusiastic blood in there(sorry if spelling is off)
Click to expand...
... :)
 
If you're worried that .gov might 'borrow' your G money here's a way around it.

You can take out a general TSP loan for the amount of your contributions and earnings up to $50k (but not the free match money or it's earnings). And take up to 5 years to pay yourself back.

You can put the loan procedes in a low cost brokerage like Schwab or Scottrade and let it sit in cash without .gov getting to it to bridge the funding gap. You can find reasonable proxies for CSI funds that trade at no/low cost and stay invested if you want to.

You can leave the money sit and pay your TSP loan back at roughly the G rate from your salary, tighten up a bit, end result is you still have all the funds you started with, with a good portion of them available instantly from a private outfit that places no 2 IFT trading restrictions on you. And the extra loan payments from regular budget are kind of like a forced savings plan except you get to pre-fund the outside account.

Of course, I'm aware of the 'you have to put it in and leave it in so it's there for your retirement' arguement. On the other hand, if we were all so sure it will still be there for our retirment we probably wouldn't need a thread with a title like this.

I'm doing it right now, and I benefitted greatly from the increased peace of mind that the extra available resources gave me during the recent uncertaintity of the shutdown/furlough situation.
 
To all who appear concerned - I just want to make sure you all understand this-

If, for reasons of debt ceiling, the federal treasury guys decide to tap into the G fund holders and use that money for their own debt ceiling reasons... there is NO EFFECT on the ability to trade or move your TSP account money. You STILL can move your money, just like now. (Except for the two per month limit, which sucks). There is no ban on interfund transfers of any kind during those periods where the government takes our money.

At least, that is how it had operated on all past occasions.

If you want to move out of "G" and into "S", or "C" during the time they are taking our money, you STILL can do so.

Don't worry son, this is JUST AS GOOD AS CASH.

These here are I.O.U's from the U.S. Government!
 
You mean it doesn't matter where you put it because it's all just a dollar is a dollar is an I.O.U.?

And despite all it forms, they all are worth (or worthless) the just same?
 
Amazing. Amazing that TSP can't be bothered to tell us in writing that "if" they borrow G fund, that we can still keep making paper trades with our accounts, that they'll keep track of how much the official records (paper trades) say they'll owe us- according to the official IFT and contribution allocation records (paper trades) in the between times. Haven't seen anything in writing ever about that, James. If you have, could you point to the fine print?

Of course in previous times borrowing happened, I was unaware of the events and even if had known, had no worries about getting paid back in timely manner, had no clue about short-term account management either. I'm a lot more edicated about inflation and currency devaluation and shortterm account protection now than I was back then tho.

So if we go into even higher inflation/worse currency devaluation than is occurring at the moment, they can pay us back in cheaper $, no matter how many cheaper $ our accounts say we're due? So it doesn't matter how many nominal $ we accrue in official records? sounds like a plan to me. market goes higher in that case, right?
 
BUY GOLD!!!!

Wow, how I wish we had a gold, silver, platnum, lithium, copper fund.

Fundamentally, I agree with James. The boys at the fed may play paper shuffle games but your money will be safely earning a couple percent interest in G.

If you think about it, nothing really changes. Right now "G" fund money is given over to the government with the promise of a return in interest. If the "G" fund gets tapped, then the only thing that really changes is the paperwork. The same entity still is on the hook for the interest ultimately.

Has anyone heard that they are working on extensions that would get us to July and not just add a month? How would they manage that?

Possibly, they could "borrow" the whole retirement fund and be on the hook for the appropriate amount of interest as if we had money in those funds. Now, the question is, would they have to sell our positions to use that money? That step would definitely dent the market.
 
Thanks for the many helpful responses. It sounds like if one believes that the stock and bond markets could respond strongly and negatively to the debt ceiling issue -- regardless of which party is primarily at fault -- that one would be safe having shifted all assets to the G fund (even though it is very counter-intuititve to putting money into fund based upon U.S. government securities at a time when it may default on debt).

Given that the date that the U.S. will reach the ceiling seems to be somewhat ambiguous (early May) it sounds like shifting funds should probably be done sooner rather than later.
 
NigelSt.Hubbins said:
. I have come to reluctantly conclude that the Republicans would be willing to totally undermine our fragile economic recovery if they think it is to their political advantage,

I am just trying to determine a prudent course given the reasonable possibility of something really "ugly" happening

Thanks for any guidance anyone can provide!
Click to expand...
Hey Nigel I hate to tell you this but we are not all D's here. Have you noticed things have gotten really Ugly since Ubama was annointed? No, I guess not.
 
FAB1,

While I couldn't more strongly disagree with your feelings on the subject, I regret having provided any political commentary in my initial post because regardless of who is at fault the TSP financial concerns are much the same. I am much more interested in preserving my retirement savings than I am in getting in a "food fight" with Obama-bashers.

So consider me chastened, and if others have useful ideas on strategies for protecting our TSPs, please bring them on!

Nigel
 
Last edited:
Silverbird said:
It's going to be the new blood that demands the debt ceiling stays in place, quite a few of the old blood got kicked out at the last election (from both parties) on this very issue. Bringing in the new may bring in the change that some people thought they wanted and are going to really regret.

Beware what you ask for...
Click to expand...

Exactly
 
Raise the debt ceiling or don't raise the debt ceiling.
I guess they vote yea or nay depending on which position they hold when it comes up for a vote.:laugh:
Either way unless someone has found a financial clerical error it will have to be done.
 
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