facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
Changes Coming to TSP Investment Options Thumbnail

Changes Coming to TSP Investment Options

Retirement Funding TSP

One of the complaints I hear about TSP is the limited amount of investment options. Not sure I agree with that opinion, but it is out there. Well, a few years ago (2009) the Congress authorized TSP to offer other mutual funds to participants through a Mutual Fund Window. A short 13 years later the proposed rules covering the Mutual Fund Window were published in the Federal Register for comment (you have until 28 Mar to comment, if you so desire). The basics you need to understand is that when the rule goes into effect (maybe this summer), you'll be able to invest in up to thousands of different mutual funds. What to make of it?

The Good

If TSP is your only investment account, you'll be able to more precisely allocate your portfolio using the Window. Want to invest in a Real Estate Investment Trust (REIT)? Knock yourself out. The Window will allow you to put your money where your mouth is. Green investing your thing? Select funds that support what you want to support.

The Bad

Getting money into and out of the Window will be a little less than seamless. Here are some of the issues:

  • Your initial investment needs to be at least $10,000 and can't exceed 25% of your balance. That means you'll need $40,000 in the account before you can participate, Skippy.
  • Follow-on contributions can't push the Window balance to more than 25% of your overall balance.
  • You're limited to 2 inter-fund transfers in a month (this isn't new). It is unclear whether funds inside the Window count towards the limit, but you'll only be able to transfer into or out of the Window twice per month.
  • If you are required to take a distribution from TSP (think RMDs) and the balance in the legacy TSP funds are less than required distributions, funds will be taken from the mutual fund with the highest balance (you might not want this).

The Ugly

I'm a hawk on expenses and if you are too, the Window may not be where you want to go. There are a lot of fees.

  1. $55 per year to guarantee the Window doesn't increase the share of TSP administrative expenses paid by those who don't use the Window
  2. $95 annual maintenance fee
  3. $28.75 per trade cost (regardless of size of trade)
  4. Mutual fund expense ratios.

Let me add that up for you. $150 per year just to have the account. Plus $115 per year just to make 4 trades. Plus, fund fees (.007% to 1.0% depending on fund). Wow...

What to Make of It?

If you have other investment accounts, I'd do my asset allocation into other asset classes in those accounts and stick with the legacy funds in TSP. If TSP is your only investment account, then the Window may be an option, but it certainly isn't a requirement. Make sure you keep an eye on expenses too.

Military Finances are Different

There are a lot of financial advisors out there that don't even know what TSP is. They have no idea about the intricacies involved in military and veteran finances. That is why we think you should work with a financial planner that deals with military financial issues each and every day. If you'd like to find out how we work with active and retired Senior Military Officers and NCOs, give us a call or use the button below to schedule a free initial consultation. 

If you found this article useful, you might like the following blog posts:

I'm About to Retire From the Military. What Should I Do With My TSP?


What Military Officers Need to Know About TSP and Estate Planning


Roth TSP in a Combat Zone: Almost a "No Brainer"


Disclaimer
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.