Despite tremendous interest (and some dread) over the coming investment expansion for six million federal Thrift Savings Plan investors, fewer than 30 took the opportunity to make formal comments, suggestions or to criticize the proposed changes.
Sometime this summer the TSP, Uncle Sam’s in-house 401(k) plan on steroids, will offer investors — from Senators and Cabinet officers to national park rangers and IRS auditors — the option to invest in 5,000 new funds. The TSP is worth about $750 billion. It is the optional retirement nest egg for current workers and retirees. For most employees it offers a generous total 5% agency match for those who invest 5% or more. By some estimates TSP accounts for current FERS employees will supply one-third or more of the money they have to spend in retirement.
Right now, TSP investors are limited to a handful of options: the stock-indexed C, S and I funds, the bond-based F-fund and the special G-fund invested in Treasury securities. Because of the market downturn the G-fund’s 3% return leads the investment pack.
When the changes are made, investors will be able to transfer some of their current TSP balances (with a minimum deposit of $10,000) into any of the new fund options. They can transfer up to 25% of their total balance. Those who do make the change will pay special administrative fees. Investors who remain in the TSP will continue to pay fees that are among the lowest in the business.
While many of the changes are likely to catch many investors by surprise, the Federal Retirement Thrift Investment Board has published them, in detail, in the Federal Register. To read them, find a comfortable chair and click here.
Some retirement investment experts opposed the investment options expansion. They say that the current menu allows investors to invest in both the large cap (S&P 500) market via the C-fund, and to be in the rest of the U.S. market plus a limited international option via the S and I funds. There are also half a dozen self-adjusting target date investment options. Plus the bond and special Treasury fund options. Giving the average person — which is most of us — more choices will only confuse people. Or permit them to put money in funds-with-a-cause goals that will pay little or nothing over the long haul. But most pros who have eyeballed the pending changes say they are well conceived and thought out. And that the low-fees (which can add tens of thousands of dollars to your available retirement cash) will continue for those who stick with the regular program.
For a sneak preview, listen to today’s Your Turn radio show. My guest is Kim Weaver, director of external affairs for the board that runs the massive TSP operation. The show is live at 10 a.m. EDT over at federalnewsnetwork.com or at 1500 AM in the Baltimore-Washington area.