Reply to Maxing out TSP

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[quote=Anonymous][quote=Anonymous]Doesn't congress "borrow" from our tsp balances to balance the budget?
[/quote]

How could borrowing balance the budget?

Borrowing can only finance a budget deficit, not bring it into balance.

The TSP is invested in various assets, like all funded pensions.

One of those assets , the G Fund, is government bonds. These do finance the budget deficit, and roll over existing debt.

So your returns are reliant on a promise by the government to pay you in the future, just like the FERS annuity.

What happens if the government gets to the stage where it is unable to meet its promises? Ie if people become unwilling to continue lending to the government? It could:

1. Raise taxes
2. Cut discretionary spending 
3. Cut future expenses, e.g by grandfathering current pensioners and introducing a new defined contribution scheme, or making social security taxable
4. Borrow from the central bank (the Fed), which could result in higher inflation.

I would not assume that social security, or government pensions, are any less secure than money invested in a 401k. Quite the opposite. The Cntral government is usually the last thing to fail. That said, property/real estate may be safer.[/quote]

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