facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
Is it Time for a Re-look at TSP? Thumbnail

Is it Time for a Re-look at TSP?

Retirement Funding TSP

I'm generally a fan of TSP. One of the things I like about it is the low expense ratios. But, those expense ratios have been creeping up over the last few years and that could be an issue. So let's take a look.

TSP Expense Ratios Compared to Other Low-Cost Options

So how does TSP expense ratios compare to other options? Here is a comparison between TSP and investments I commonly recommend to clients.

Fund Total Expense Ratio Equivalent Investment Expense Ratio
C Fund 0.043% SCHX 0.03%
F Fund 0.046% BIV 0.05%
I Fund 0.049% IEFA 0.07%
S Fund 0.06% VBR 0.07%
G Fund 0.043% No True Equivalent


As you can see, with the exception of the C Fund, TSP has lower expense ratios than the selected alternatives, but the alternatives are pretty close. While I haven't explored every option out there, I do consider expense ratios when I select funds. In other words, there may be funds available that I don't use that have lower expense ratios (expense ratios aren't the only factor I use when selecting funds). You probably won't have low cost options like these available in a 401(k) or 403(b)

If expense ratios are your deciding factor, then TSP wins.

Other TSP Factors to Consider

There are other things to think about, when deciding what to do with your TSP. Here are a few:

  • Creditor Protection. As an employer sponsored plan, funds inside TSP are protected from creditors. Creditor protection is limited in IRAs but normally this isn't an issue for most people as in most states, $1M is protected
  • Diversification. While you can design a adequately diversified portfolio inside TSP. You can more precisely diversify outside TSP.
  • Tax Exempt Balance. If you have a tax exempt balance due to combat zone contributions, you can't transfer those funds to another retirement account (If the other retirement account can account for the tax exempt balance, you can transfer the tax exempt balance. I haven't found one that can).

Military Finances are Different

Just like serving in the military isn't like a civilian job, military finances aren't like civilian finances. We're guessing most advisors out there would have no clue about tax exempt balances inside TSP (as one example). That's why we think you should work with a financial advisor or planner who works with military financial issues each and every day. Give us a call if you'd like to chat.



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

Watch Out for this TSP Tax Trap


Retired Military Finances 101: 401(k) plans. A Lot Like TSP, But Not the Same


What Military Officers Need to Know About TSP and Estate Planning






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.