It’s well known that when they leave government, roughly one-third of all Thrift Savings Plan investors move some or all of their money into an outside IRA or another 401k. Most say they do it either because it is easier to get at their money, or they are looking for investment vehicles — like a green fund or a country or industry specific fund — that offer more options than the TSP’s five funds (C,S,I,F and G).
What it not as well known is that the investment traffic to and from is a two-way street. In fact a growing number of savvy feds — from federal judges and politicians to letter carriers, park rangers and other rank-and-file civil servants — are and have been rolling outside money into the TSP at an impressive and growing scale.
For those transferring money from outside retirement funds into the TSP, the reasons are obvious. The TSP has some of the lowest administrative fees in the business. Congress designed it to be super-safe. Most members of Congress are probably in the TSP. It also has as much or more outside oversight than any other 401k plan.
Recently I got an email from a fed who said he had read columns about why TSP participants transfer out of the TSP when they leave government. He asked what his options are:
The reasons mostly mention more investment options and flexibility. When I retire, I plan to transfer my TSP account to an external firm. Why? In a word, consolidation. I have not seen any columns that mention this.
My wife and I worked in non-federal jobs for many years before I became a federal employee. We have other retirement accounts and investments that can’t be transferred into TSP, and I would like to minimize the number of places where my retirement funds and other investments are located. Also, many investment firms decrease their fees if you can maintain minimum account balances. Consolidation can help to meet those requirements.
I don’t know if other TSP participants think about consolidation, or even have that as an option, but it is an important topic for me.
Great question. So I checked with Kim Weaver, director of external affairs for the Federal Retirement Thrift Investment Board, which runs the TSP. This is what she said:
Your correspondent is correct – consolidating your retirement accounts makes good sense. That’s why we regularly inform TSP participants that they can roll their qualified retirement accounts into the TSP. That message seems to be resonating because participants have been rolling money in at a fairly steady pace – see the attached table. We have information on tsp.gov that provides the information participants need to see if their retirement account is eligible to be rolled into the TSP and how to do it: https://www.tsp.gov/tsp-basics/move-money-into-tsp/
We also have this scorecard to help participants make a decision about whether to move their accounts: https://www.tsp.gov/publications/tsplf37a.pdf
As background, the average FERS employee joining the government starts in their mid-30s so a lot of them have retirement accounts from their previous jobs; it’s not just high-paid lawyers or those types who are rolling their accounts into the TSP.
So how popular is the practice of bringing money into the TSP? Look at the official roll-in numbers:
|Year||# of Roll Ins||Total $ Roll Ins|
Nearly Useless Factoid
By David Thornton
Astronomers and physicists have hypothesized for 40 years that within the icy layers of Neptune and Uranus, it rains diamonds.
Source: American Scientist