Can I Use TSP to Invest in Gold?

Federal employees who qualify for the federal retirement system have access to the Thrift Savings Plan. The plan is roughly equivalent to a private employer's 401(k) plan. It allows you to have money taken out of your paycheck before taxes, and it offers employer matching contributions. Like many 401(k) plans, the TSP also gives you a choice of investment options. These include stock and bond funds, but not gold.

Investment Options

As of 2013, the TSP offers five primary funds and a set of target-date "lifecycle" funds, made up of different mixes of the other five funds. The G fund offers guaranteed principal and buys specially issued government securities, while the F fund buys a blend of bonds. The S, C and I funds own stocks with different degrees of risk. The C fund tracks the Standard and Poor's 500 index, the S fund tracks small and mid-size companies, and the I fund owns international stocks from developed countries. While the stock funds could have some exposure to gold companies, those firms would make up a relatively tiny part of the portfolio.

TSP Loans

One way you could tap into TSP money to buy gold is to take out a loan against your account. The TSP may allow you to borrow money for any reason with a "general purpose loan." You will need to be a federal employee and be receiving a federal paycheck, and you will need to pay back the loan within five years. While you are borrowing from the TSP, you pay the interest to yourself at the rate of the G fund, but your money stops working for you in one of the TSP funds. If you don't pay the loan back, you could be subject to tax penalties.

Wider View

You could look at your TSP as a part of your overall investment portfolio. Let's say you wanted to sock away $15,000 a year, including $1,000 in gold. You could put $14,000 into stock and bond funds in the TSP, with the rest going into physical gold or a gold fund in a separate account. The accounts would be different, but you'd still hit your contribution goal. Because gold doesn't throw off interest payments, any growth will be tax-deferred until you sell it.

Alternatives to Gold

Just because gold isn't an option in the TSP doesn't mean that you can't achieve similar goals with the funds that are available in the TSP. If you want to own a secure investment that protects your money, the G fund's principal guarantee may suit your needs. On the other hand, if you're worried about inflation eroding the value of your investments, shares of stock like those held by the S and C funds also typically are able to grow in value with inflation. Finally, if your primary concern is that the U.S. dollar could lose value in the future, diversifying into international investment with the I fund can help to hedge your currency risk.

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About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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