Informative Speech: Retirement Savings Plans
TSP
Specific Purpose: To inform my audience about the different funds and possible risk and rewards of the Thrift Savings Plan.
Central idea: The main types of funds that you can invest in are the G, F, C, S, and I funds, and lifecycle funds.
Introduction
I. Many of us have financial worries in the present and neglect to think about how financially stable we will be in the future. National Institute on Retirement Security released a new report on the current state of retirement savings in America. The study confirmed 38 million working-age households (45%) do not own any retirement account assets. 80% of all working people ages 25-64 have less than 1 times their annual income in retirement savings.
II. We as government employs can prevent …show more content…
future financial worries now by investing in the thrift savings plan.
III. The thrift savings plan has many options to invest funds into varying in risk and personal effort/commitment.
(Let’s explore these options)
Body
I.
The safest option is the G fund or Government Securities Investment Fund.
a. The G Fund's objective is to produce a rate of return that is higher than inflation while avoiding exposure to credit (default) risk and market price fluctuations.
b. The G Fund invests exclusively in a nonmarketable short-term U.S. Treasury security that is specially issued to the TSP. The earnings consist entirely of interest income on the security.
c. The G Fund is subject to inflation risk, or the possibility that your G Fund investment will not grow enough to offset the reduction in purchasing power that results from inflation.
d. Consider investing in the G Fund if you would like to have all or a portion of your TSP account completely protected from loss. If you choose to invest in the G Fund, you are placing a higher priority on the stability and preservation of your money than on the opportunity to potentially achieve greater long-term growth in your account through investment in the other TSP funds.
II. Another less risky option is the F fund or Fixed Income Index fund.
a. The point of the F Fund is to match the performance of the Barclays Capital U.S. Aggregate Bond Index, a broad index representing the U.S. bond …show more content…
market.
b. This broad index includes U.S. Government, mortgage-backed, corporate, and foreign government sectors of the U.S. bond market. The earnings consist of interest income on the securities and gains (or losses) in the value of the securities.
c. F Fund investments are subject to market risk, the risk of a decline in the market value of stocks or bonds. For example, when interest rates rise, bond prices (and thus, the returns of the index and the F Fund) fall. Conversely, in an environment of falling interest rates, bond prices, as well as the index and F Fund returns, rise.
d. The F Fund includes only investment-grade securities. F Fund investors are rewarded with the opportunity to earn higher rates of return over the long term than they would from investments in short-term securities such as the G Fund.
III. The next couple funds relate to stocks instead of bonds. The C fund or common stock index investment fund invest in well-known American companies.
a. The C Fund's goal is to match the performance of the Standard and Poor's 500 (S&P 500) Index, a broad market index made up of stocks of 500 large to medium-sized U.S. companies that includes; Apple, Inc., Johnson & Johnson, Exxon Mobil Corp., Chevron Corp., Google, Inc. Procter & Gamble, Microsoft Corp. JP Morgan Chase & Co., General Electric Co., and Wells Fargo & Co. to name a few.
b. Your investment in the C Fund is subject to market risk because the prices of the stocks in the S&P 500 Index rise and fall.
c. While investment in the C Fund carries risk, it also offers the opportunity to experience gains from equity ownership of large and mid-sized U.S. company stocks.
d.
The C, S, and I Funds track different segments of the overall stock market without overlapping. This is important because the prices of stocks in each market segment don't always move in the same direction.
IV. The S fund or small cap investment fund, also focuses on American companies.
a. The S Fund's investment objective is to match the performance of the Dow Jones U.S. Completion Total Stock Market Index, a broad market index made up of stocks of U.S. companies not included in the S&P 500 Index.
b. The earnings consist of dividend(profit sharing) income and gains (or losses) in the price of stocks.
c. Your investment in the S Fund is subject to market risk because the Dow Jones U.S. Completion Total Stock Market Index returns will move up and down in response to overall economic conditions.
d. While investment in the S Fund carries risk, it also offers the opportunity to experience gains from equity ownership of small to mid-sized U.S. companies.
V. The I fund or international stock fund focuses on international stocks.
a. The I Fund invests in a stock index fund that fully replicates the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index. The earnings consist of gains (or losses) in the price of stocks, dividend income, and change in the relative value of
currencies.
b. Besides market risk, its exposed to currency risk. The EAFE Index (and the I Fund returns) will rise or fall as the value of the U.S. dollar decreases or increases relative to the value of the currencies of the countries represented in the EAFE index.
c. While investment in the I Fund carries risk, it also offers the opportunity to experience gains from equity ownership of non-U.S. companies.
VI. The L Funds, or "Lifecycle" funds, use professionally determined investment mixes that are tailored to meet investment objectives based on various time horizons.
a. The L Funds' strategy is to invest in an appropriate mix of the G, F, C, S, and I Funds for a particular time horizon, or target retirement date. The investment mix of each L Fund becomes more conservative as its target date approaches.
b. Each quarter, the L Funds' target asset allocations change, moving towards a less risky mix of investments as the target date approaches. So if you are invested in one of the L Funds, you will notice that as you get closer to your target date, your allocation to the riskier TSP funds will get smaller while your allocation to the more conservative G Fund gets larger.
c. Use the L Funds if you are looking for a simple, low maintenance way of investing money in your TSP account. The L Funds make the investing process easy for you because you do not have to figure out how to diversify your account or how and when to rebalance.
Conclusion
I. Although the future is not guaranteed putting away a small percentage of your income now for the future can make a world of difference in your later years.
II. You now know the risk and benefits of each fund in the Thrift Savings plan.
Bibliography
Harris, Karen K. "The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform." New Statistics on the American Retirement Savings Crisis : The Shriver Brief. N.p., 07 Aug. 2013. Web. 26 Apr. 2014.
"G Fund: Government Securities Investment Fund." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
"F Fund: Fixed Income Index Investment Fund." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
"C Fund: Common Stock Index Investment Fund." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
"S Fund: Small Cap Stock Index Investment Fund." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
"I Fund: International Stock Index Investment Fund." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
"Lifecycle Funds." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
Specific Purpose: To inform my audience about the different funds and possible risk and rewards of the Thrift Savings Plan.
Central idea: The main types of funds that you can invest in are the G, F, C, S, and I funds, and lifecycle funds.
Introduction
I. Many of us have financial worries in the present and neglect to think about how financially stable we will be in the future. National Institute on Retirement Security released a new report on the current state of retirement savings in America. The study confirmed 38 million working-age households (45%) do not own any retirement account assets. 80% of all working people ages 25-64 have less than 1 times their annual income in retirement savings.
II. We as government employs can prevent …show more content…
future financial worries now by investing in the thrift savings plan.
III. The thrift savings plan has many options to invest funds into varying in risk and personal effort/commitment.
(Let’s explore these options)
Body
I.
The safest option is the G fund or Government Securities Investment Fund.
a. The G Fund's objective is to produce a rate of return that is higher than inflation while avoiding exposure to credit (default) risk and market price fluctuations.
b. The G Fund invests exclusively in a nonmarketable short-term U.S. Treasury security that is specially issued to the TSP. The earnings consist entirely of interest income on the security.
c. The G Fund is subject to inflation risk, or the possibility that your G Fund investment will not grow enough to offset the reduction in purchasing power that results from inflation.
d. Consider investing in the G Fund if you would like to have all or a portion of your TSP account completely protected from loss. If you choose to invest in the G Fund, you are placing a higher priority on the stability and preservation of your money than on the opportunity to potentially achieve greater long-term growth in your account through investment in the other TSP funds.
II. Another less risky option is the F fund or Fixed Income Index fund.
a. The point of the F Fund is to match the performance of the Barclays Capital U.S. Aggregate Bond Index, a broad index representing the U.S. bond …show more content…
market.
b. This broad index includes U.S. Government, mortgage-backed, corporate, and foreign government sectors of the U.S. bond market. The earnings consist of interest income on the securities and gains (or losses) in the value of the securities.
c. F Fund investments are subject to market risk, the risk of a decline in the market value of stocks or bonds. For example, when interest rates rise, bond prices (and thus, the returns of the index and the F Fund) fall. Conversely, in an environment of falling interest rates, bond prices, as well as the index and F Fund returns, rise.
d. The F Fund includes only investment-grade securities. F Fund investors are rewarded with the opportunity to earn higher rates of return over the long term than they would from investments in short-term securities such as the G Fund.
III. The next couple funds relate to stocks instead of bonds. The C fund or common stock index investment fund invest in well-known American companies.
a. The C Fund's goal is to match the performance of the Standard and Poor's 500 (S&P 500) Index, a broad market index made up of stocks of 500 large to medium-sized U.S. companies that includes; Apple, Inc., Johnson & Johnson, Exxon Mobil Corp., Chevron Corp., Google, Inc. Procter & Gamble, Microsoft Corp. JP Morgan Chase & Co., General Electric Co., and Wells Fargo & Co. to name a few.
b. Your investment in the C Fund is subject to market risk because the prices of the stocks in the S&P 500 Index rise and fall.
c. While investment in the C Fund carries risk, it also offers the opportunity to experience gains from equity ownership of large and mid-sized U.S. company stocks.
d.
The C, S, and I Funds track different segments of the overall stock market without overlapping. This is important because the prices of stocks in each market segment don't always move in the same direction.
IV. The S fund or small cap investment fund, also focuses on American companies.
a. The S Fund's investment objective is to match the performance of the Dow Jones U.S. Completion Total Stock Market Index, a broad market index made up of stocks of U.S. companies not included in the S&P 500 Index.
b. The earnings consist of dividend(profit sharing) income and gains (or losses) in the price of stocks.
c. Your investment in the S Fund is subject to market risk because the Dow Jones U.S. Completion Total Stock Market Index returns will move up and down in response to overall economic conditions.
d. While investment in the S Fund carries risk, it also offers the opportunity to experience gains from equity ownership of small to mid-sized U.S. companies.
V. The I fund or international stock fund focuses on international stocks.
a. The I Fund invests in a stock index fund that fully replicates the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index. The earnings consist of gains (or losses) in the price of stocks, dividend income, and change in the relative value of
currencies.
b. Besides market risk, its exposed to currency risk. The EAFE Index (and the I Fund returns) will rise or fall as the value of the U.S. dollar decreases or increases relative to the value of the currencies of the countries represented in the EAFE index.
c. While investment in the I Fund carries risk, it also offers the opportunity to experience gains from equity ownership of non-U.S. companies.
VI. The L Funds, or "Lifecycle" funds, use professionally determined investment mixes that are tailored to meet investment objectives based on various time horizons.
a. The L Funds' strategy is to invest in an appropriate mix of the G, F, C, S, and I Funds for a particular time horizon, or target retirement date. The investment mix of each L Fund becomes more conservative as its target date approaches.
b. Each quarter, the L Funds' target asset allocations change, moving towards a less risky mix of investments as the target date approaches. So if you are invested in one of the L Funds, you will notice that as you get closer to your target date, your allocation to the riskier TSP funds will get smaller while your allocation to the more conservative G Fund gets larger.
c. Use the L Funds if you are looking for a simple, low maintenance way of investing money in your TSP account. The L Funds make the investing process easy for you because you do not have to figure out how to diversify your account or how and when to rebalance.
Conclusion
I. Although the future is not guaranteed putting away a small percentage of your income now for the future can make a world of difference in your later years.
II. You now know the risk and benefits of each fund in the Thrift Savings plan.
Bibliography
Harris, Karen K. "The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform." New Statistics on the American Retirement Savings Crisis : The Shriver Brief. N.p., 07 Aug. 2013. Web. 26 Apr. 2014.
"G Fund: Government Securities Investment Fund." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
"F Fund: Fixed Income Index Investment Fund." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
"C Fund: Common Stock Index Investment Fund." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
"S Fund: Small Cap Stock Index Investment Fund." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
"I Fund: International Stock Index Investment Fund." TSP:. N.p., n.d. Web. 26 Apr. 2014. .
"Lifecycle Funds." TSP:. N.p., n.d. Web. 26 Apr. 2014. .