G Fund up 40 Basis Points

[Yankuba]

Good news for TSP participants - the G Fund is up to 2.75% - pretty good for zero risk.

https://www.tspfolio.com/tspgfundinterestrate

[Ricksun]

Yeah; it's a target for Trump in his budget bill though.  Apparently feds shouldn't be getting long term rates for short term guarantees.

Ricksun

[Yankuba]

They really should get rid of it being that it is a free lunch. Replace it with a government bond index that fluctuates in value and add a cash option for people terrified of investing in stocks and bonds.

[dandarc]

A lot of 401K's provide stable value funds. Rate doesn't seem out of line with private sector stable value funds.  What exactly is the problem with it?

[Yankuba]

I believe the issue is the government guarantees an intermediate treasury rate but there is no risk to the owner of the fund - the fund can only appreciate in value. There is a dollar cost to the government of providing the G fund, which is why Trump wants to kill it.

This is from an article:

“G Fund investors currently benefit from receiving a medium-term rate of return on what is essentially a short-term security,” the 2019 budget proposal said. “Basing the yield on a short-term T-bill rate instead of the current rate (an average of medium and long term Treasury bond rates) would reduce both the projected rate of return to investors and the cost of the fund to the Treasury.”

[Yankuba]

G fund is now closing in on three percent:

https://www.tspfolio.com/tspgfundinterestrate

This is having a major impact on my numbers. Going from a bond return of 2.5% to 2.9% is huge. I can take out more money per year because the earnings of the portfolio are higher or I can retire sooner.

[sol]

It's not just the G fund.  Look at 10 year Tbills, for example, or TIPS or annuities.  Easy money is finally creeping away from zero.  It's about time, if you ask me.