The G Fund's investment objective is to produce a rate of return that is higher than inflation while avoiding exposure to credit (default) risk and market price fluctuations.
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.
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.
The payment of G Fund principal and interest is guaranteed by the U.S. Government. This means that the U.S. Government will always make the required payments. In other words, your G Fund investment is not subject to credit (default) risk.
The G Fund interest rate calculation is based on the weighted average yield of all outstanding Treasury notes and bonds with 4 or more years to maturity. As a result, participants who invest in the G Fund are rewarded with a long-term rate on what is essentially a short-term security. Generally, long-term interest rates are higher than short-term rates.
How can I use the G Fund in my TSP account?
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.
The total amount of debt that the U.S. Treasury can issue to the public and to Federal agencies is limited by law. In recent years this limit—and what to do when it has been reached—has been discussed in the news with increasing frequency. What does it have to do with the G Fund?
The G Fund is invested in short-term U.S. Treasury securities specially issued to the TSP. As a result, the G Fund can be affected when the statutory debt limit is reached. However, the principal and interest payments on these securities are guaranteed by the U.S. Government.
When it reaches the debt limit, the Treasury has to find ways to manage its cash and borrowing so that it can continue funding government activities. One of the many ways it can do this is by suspending investments of the G Fund. As a G Fund investor, you should know that if the Treasury takes this action, your investment is always protected, and your G Fund earnings are fully guaranteed by law under the Thrift Savings Plan Investment Act of 1987. Your G Fund account balance would be exactly the same from day- to-day as if it were invested in Treasury securities. It will continue to accrue earnings and be updated each business day, and loans and withdrawals will be unaffected.
For more detailed information about how the G Fund is protected when the U.S. Government reaches its debt limit, refer to the reports prepared by the Congressional Research Service and the Government Accountability Office.
Need More Info?
For more detailed information about the G Fund, refer to the G Fund Information Sheet.