Does Share Price Matter in the TSP?

Short Answer: No, not really.

Long Answer: Well, it does serve as a convenient way to keep score in some cases, but the way that TSP structures our investments, you’ll see that it doesn’t hold the same importance as share prices do in the real world. Read on for a better explanation.

Share Price—what is it?

In the real world, if you purchase 1 share of a company’s stock—let’s say Coca-Cola—you become part owner in that company. As I type this, Coke is $70.98 a share. If you were to call up your broker and spend $70.98, you’d own 1 share of Coke (symbol KO). You now own a tiny (infinitesimal, really) share of every Coke truck, plant, bottle, and cute little polar bear sign, that Coke owns. You are entitled to dividends (a portion of the profits that the company pays out every year. Currently Coke is paying $2.04 a share. That’s about 3% annual return on your money. Nice!), and you are entitled to cast your vote at the annual shareholder’s meeting if you want to throw your weight around to pick and choose board members.

Basis—what is it?

The reason the share price is so vital in the real world is the concept of “basis”. You’re gonna learn some high finance/accounting principles now. Basis is essentially the money you have in the investment. The purchase price. It can also be thought of as the tax-free portion of the investment. What do I mean by that?

If you paid $70 for Coke and you sold that in a year for $100, you wouldn’t owe taxes on $100, right? Why? Well because $100 isn’t your gain. You have to subtract out your basis. The basis is the tax-free part, or the money you have in the stock. You have $70 in the stock. You sold it for $100. So your gain is only $30, not $100. ($100-$70). The $70 is your basis.

Basis is absolutely critical in all investing and tax preparation in the real world. And since it is based on share price, both of those things end up being critical in the real world.

Now, let’s head over to the artificial world of the TSP…..

We have share prices in the TSP, too. Every fund (G, F, C, S, I, and all the L Funds) has a share price that is updated daily on TSP.gov. But these share prices are a little more arbitrary, and aren’t exactly as critical as share prices in the real world. Let me explain.

The TSP issues every new fund at $10 a share. That’s just their policy. It could just as easily be $1 a share, $100 a share, or $1m a share. It would make no functional difference. We haven’t really had any new TSP funds come out for over 20 years, except for the L Funds. Every 5 years, a new L Fund comes out. And that fund is always issued at $10 per share.

That happened this year (2025). On June 30, 2025, the L2075 fund was born. (Can you imagine retiring in 2075?!?!?) It was issued the standard arbitrary value of $10 a share. As of this writing, it is up to $10.62 a share.

In 2003, TSP just randomly made ALL funds $10 a share. G, F, C, S, and I were all set to $10 a share. They were all even as of that date. Even though G and C had been around for almost 20 years already. Which does make it convenient to compare each one’s returns since then without doing the per-year-percentage-calculations. You can just look at each one of their share prices in May of 2003 and today in 2025.

Now, the TSP could do the same exact thing tomorrow. Your C Fund is currently the highest of all funds at $105.71 a share. Tomorrow TSP could set that at $10 a share and it would affect your investment in no real way.

Wait—how can that be? Wouldn’t I be losing $95 a share?!?!?

Time to look at a pizza.

Let’s say you bought a pizza and you have the choice of dividing that pizza up into the number of slices you desire. You could choose to have it cut into 2, 4, 8 , or 16 slices. Each slice would be correspondingly smaller and smaller. But OVERALL, you’d have the same TOTAL amount of pizza. It wouldn’t really matter how you divided it. There’s no way to divide the pizza to have more (or less) pizza. The only thing you can do is change the number of slices or shares that you have. And as you created more slices, you’d have each slice weighing less. One slice that weighs 4 ounces is no different than having two slices that weigh 2 ounces each. You still have 4 ounces of pizza.

Your TSP works the exact same way. If you have $100,000 in the C Fund, it doesn’t matter if the C Fund is split into 100,000 shares at $1 each, or 1 share at $100,000 each. You’ve got the same amount of C Fund.

But the more shares I have, the more money I’ll make, right?

Absolutely not.

Let’s play that out.

Example One: 100,000 shares at $1 each. The S&P 500 (the C Fund) goes up 10% this year. That means your C Fund goes from $1 a share to $1.10 a share in value. You’ve made 10%. You have 100,000 shares. 100,000 shares x $1.10 = $110,000.

Example Two: 1 share at $100,000 each. The S&P 500 (the C Fund) goes up 10% this year. That means your C Fund goes from $100,000 a share to $110,000 a share in value. You’ve made 10%. You have 1 share. 1 share x $110,000 = $110,000.

In both cases you have $110,000. You can divide those two pizzas up any way you want, but the total is $110,000.

But what about dividends, Chris! You talked about that in the Coke example. The more shares we have the more dividends we get. If we reinvest those dividends each time we get them, it buys us more shares!!

That is absolutely true—in the real world. In the TSP world, yes we get dividends as well. But not in the form of additional shares. In the TSP world, when we get dividends credited, the TSP simply adjusts the daily share price. The same way that they do when we pay expenses. You will never see a line item showing “annual fee” or “annual dividend”. They are simply absorbed/calculated/merged into the daily share price adjustment. In fact, that 10% increase above in the previous example included the 2% of dividends for the year. The S&P 500 went up 8% but when we add the 2% of dividends we received from it also, it went up a total of 10%.

What about that basis thing, Chris?

Remember—basis is primarily for tax purposes. In the Traditional side of the TSP, you don’t get a basis, or a portion of your share price that is tax-free. EVERYTHING coming out of the Traditional side is taxable. The basis (if you want to call it that) AND the gain. If we revisit our Coke example above, the entire $100 would be taxable when we withdrew it from the Traditional TSP. Not just the $30 gain. In the Traditional TSP, all of the money in there (contributions, earnings, gains, dividends, matching, rollover, etc.) is all pre-tax so it’s ALL taxed upon withdrawal.

So, while basis can show you the gain per share, it’s not very useful beyond that, since the main purpose is for taxes and thus it’s irrelevant inside the Traditional TSP.

In the Roth TSP, it works a little bit differently. There is a reason to track the gains, i.e. earnings. In order for your Roth TSP withdrawal to be completely tax free including the earnings, the account holder has to have had it opened for at least 5 years and has to have reached 59.5 years of age. If the person makes a withdrawal before then, then part of that withdrawal will include earnings, and those earnings will be taxable. The contributions will never be taxable, but the earnings will be.

(And yes, that 59 1/2 is true for both Regular FERS and Special Category FERS. The exception of being able to access your money at 55 for Regular FERS, or at any age for SCE’s applies to Traditional side only, not Roth. Roth is 59.5 if you want it to be completely tax free).

Incidentally, this is going to be a major pain from a tax standpoint if the TSP ever allows the government matching to go into the Roth. You’ll be taxed on something that you didn’t actually receive so there WILL have to be some sort of accounting to make sure that your matching is not taxed again if you pull it out too early.

So, what’s the point to all of this?

Really it’s just so that you better understand your TSP and how it functions. And you aren’t misguided or confused when people start focusing so much on share price. There are all kinds of investing theories out there based on just about anything you can come up with from the hemlines in women’s fashion, to Super Bowl winners, to who is in the White House, to the share price of an investment. Like a lower (or sometimes higher?) share price translates into a better investment for some reason. People that follow this logic don’t understand that the TSP is just randomly setting these prices and that the TSP share price is not driven by supply and demand. The TSP share price is a reflection of the underlying index that it tracks.

P.S.- Divorce

The one place where shares and share prices do accomplish a meaningful function in the TSP is in the case of divorce. Let’s says someone owned 100,000 shares of the C Fund the day before they got married. And it was $1 a share. They had $100,000 in their pre-marital TSP balance. Fast forward 15 years into the marriage. The government employee’s TSP is now worth $700,000 total. And all of sudden they decide they made a mistake and don’t want to be married anymore. Many people would assume that the $700k means $350k for each of them. Split 50/50, right? Not always…..

Remember—that Fersonian had $100,000 in his TSP pre-marriage. That’s his.

So, then we subtract the $100k from the $700k and split the $600k in half ? Not so fast!!! That $100k has now grown to….well….what has it grown to actually? And how would we calculate that?

Enter the share prices and number of shares. Now, we can use this extra accounting for some good. We know that the Fersonian had 100,000 shares at $1. If those shares are now worth $2, then his pre-marital investment has grown to $200,000 (100,000 shares x $2). So we go back to our $700,000 current balance, subtract the $200,000, and now they split $500,000. This saves the Fersonian quite a bit of payout. And drives the spouse’s attorney nuts. (Something to keep in mind if you find yourself in that situation……). Ask the great and powerful Dan Jamison about this if you think this might be applicable to you. Some states may or may not allow for this sort of calculation.

Hopefully this helps everyone understand the share price in the TSP. As I said from the beginning, it’s not completely worthless, but it doesn’t carry the same weight as a share price would in the real world, so be careful drawing too many conclusions from it.