The recent Veterans Day holiday celebrated the men and women who serve the U.S. in its armed forces. One of the ways that Americans honor service members is by ensuring that they're taken care of financially, not just during their time in active duty but also after they've left service and retired.
One key tool that service members and other federal employees have to save for their long-term financial security is the Thrift Savings Plan. This retirement plan acts a lot like a 401(k) plan for private-sector employees, allowing participants to set aside a certain portion of their pay and invest it in various investment options. One of the biggest benefits of the Thrift Savings Plan is that its various choices for investing are among the cheapest in the industry, with fees typically running between $2 and $4 annually for every $10,000 invested.
Every year, the Thrift Savings Plan gives participants and the general public a chance to see how much money is invested in each of the investment options it offers. The latest report from 2017 shows that most federal employees tend to be pretty balanced with their investing.
Two of the TSP's five funds -- the G Fund and the F Fund -- are focused on fixed-income securities like bonds. The G Fund is by far the largest, paying an interest rate equal to the weighted average of long-term Treasury debt. The F Fund takes a broader approach that includes corporate bonds. Between the two, investors in the TSP have about 45% of their assets invested in bonds.
The other three funds focus on different areas of the stock market. The C Fund tracks the S&P 500, while the S Fund is for small-cap U.S. stocks and the I Fund invests in international stocks. Service members and federal employees have a big preference for the blue-chip U.S. stocks with which they're most familiar, but they also have respectable allocations to other types of stocks.
All in all, an allocation of 55% to stocks and 45% to bonds is a solid way to invest. By keeping good levels of exposure to the stock market, military members are putting themselves in a good position to reach financial security when they choose to leave service.
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