A New Year and A New Benchmark Index for the TSP I Fund
Ringing in the new year for your retirement savings? The Thrift Savings Plan (TSP) has some good news: the International Stock Index Investment Fund, also known as the I Fund, is getting a makeover! Starting in 2024, it will track a brand new benchmark index, expanding your investment horizons and potentially boosting your long-term returns.
What’s the I Fund and this new index all about?
The I Fund is one of five core investment options within the TSP, providing exposure to international stocks. Its current benchmark, the MSCI Europe, Australasia and Far East (EAFE) Index, focuses on developed markets. The new benchmark, the MSCI All Country World ex USA ex China ex Hong Kong Investable Market Index (MSCI ACWI IMI ex USA, ex China ex Hong Kong), opens the door to a wider world, including:
Emerging markets
The current I Fund does not allow any investments in Emerging Markets. The new index adds this ability. It can now add one of the biggest trading partners of the United States, Mexico.
| Emerging Market | ||||
|---|---|---|---|---|
| Brazil | Chile | Columbia | Czech Republic | Egypt |
| Greece | Hungary | India | Indonesia | S. Korea |
| Kuwait | Malaysia | Mexico | Peru | Philippines |
| Poland | Qatar | Saudi Arabia | South Africa | Taiwan |
| Thailand | Turkey | UAE | ||
Stocks in 21 Developed Markets:
Also expands the existing exposure to developed markets. It does remove exposure to Hong Kong but added Canada, the third biggest trading partner of the US.
| Developed Market | ||||
|---|---|---|---|---|
| Australia | Austria | Belgium | Canada | Denmark |
| Finland | France | Germany | Ireland | Isreal |
| Italy | Japan | Netherlands | New Zealand | Norway |
| Portugal | Singapore | Spain | Sweden | Switzerland |
| U.K. | ||||
Greater stock diversification:
From tech giants to healthcare innovators, the index encompasses a broader range of industries and invests in 5,627 companies accross the 21 developed markets and 12 emerging markets above.
But Why Change the I Fund?
The Federal Retirement Thrift Investment Board had plans to update the I Fund since 2009. The initial plans were approved to use an index that excluded the United States. However, the Trump administration raised concerns about exposure to China, and implementation was halted. In 2023, the board approved to the use of different index that excluded China and Hong Kong. Several factors played a role:
- Growth potential: Emerging markets offer promising growth opportunities, potentially enhancing your overall portfolio performance.
- Diversification benefits: A wider range of investments helps spread risk and protect against downturns in any single market.
- Evolving global economy: The international marketscape is changing, and the new index better reflects this reality.
What does this mean for you, the TSP participant?
- Broader exposure: Your I Fund investments will now be spread across a larger, more diverse pool of companies, potentially leading to improved long-term returns.
- Reduced risk: Diversification across developed and emerging markets can help hedge against volatility in any single region.
- Stay informed: Keep an eye on TSP communications and educational resources to learn more about the new index and its implications for your portfolio.
This move aligns with the broader market trend of increased exposure to emerging markets and international diversification
Many mutual funds already offer similar options, and the TSP is adapting to keep pace with investor needs and the evolving global economy.
So, as you welcome the New Year, remember that your TSP investments are on the move too. Embrace the broader opportunities presented by the new benchmark index and look forward to potentially brighter prospects for your retirement nest egg!
Reach Out to Us!
If you have additional federal benefit questions, reach out to our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). At PlanWell, we focus on retirement planning for federal employees. Learn more about our process designed for the career federal employee.
Preparing for a federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars here! Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Interested in having PlanWell host a federal retirement seminar for your agency? Reach out, and we can collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC today. You can schedule a one-on-one meeting here.
