
As we enter the current presidential election cycle, uncertainty is on the minds of many Americans, both young and old. For federal employees, in particular, these times can lead to concerns about the future of their Thrift Savings Plan. Here we will explore historical data from past elections to offer guidance and support informed decision-making during this pivotal period.
- Since 1950, if you invested $10,000 in the S&P 500 and only had it invested during Republican presidencies, your $10,000 would be worth approximately $78,000.
- Since 1950, if you invested $10,000 in the S&P 500 and only had it invested in Democratic presidencies, your $10,000 would be worth approximately $406,000.
- Since 1950, if you invested $10,000 in the S&P 500 and kept your money invested the whole time, no matter the political party of the president changing, your $10,000 would now be worth approximately $3,154,000.
Achieving this significant difference in outcomes required patience and a commitment to the strategy, regardless of who was president—even during highly volatile election cycles. Over the years, there have been numerous market corrections that triggered sharp declines in retirement portfolios. Staying the course was often challenging and, at times, daunting, but those who remained steadfast are now in a much stronger financial position.
“The S&P 500 has consistently grown in value over the long term, no matter who’s in office.”
Market Performance Over the Years
Dating back to John F. Kennedy’s inauguration in 1961, the S&P 500 posted a negative return during only two presidencies: Richard Nixon and George W. Bush. With this information in mind, the most sensible strategy is often to make no changes at all. The reality is that most people, perhaps all of them, are unable to reliably predict when the stock market will rise. Missing even just a few days of positive growth can significantly impact the overall outcome of one’s retirement savings. (Click here to read an article about the impact of missing just ten good days of the market).
What This Means For Those Retiring Soon
For those who have made investment decisions based on thorough research or advice from a trusted advisor, there is no need for knee-jerk reactions to the outcome of a presidential election. Individuals nearing retirement should have already defined their goals and needs, selecting an asset allocation that aligns with their desired outcomes. Investment strategies will vary depending on factors such as age, years until retirement, distribution plans for the TSP, and other personal considerations. A well-constructed financial plan should balance funds for short-term needs with more aggressive investments aimed at long-term growth.
For those who haven’t carefully considered why their TSP is allocated in its current manner, it’s important to take a closer look—whether during a divisive election cycle or at any other time. There should always be a clear plan in place, one that evolves as personal circumstances change. However, one element that should never be part of the strategy is attempting to predict short-term market returns.