A new veteran’s Thrift Savings Plan options
Minimal effort is needed to save for retirement. You schedule an amount to come out of your check each pay period, and the contributions are on autopilot. The most popular advantage is low costs. The TSP likely has the lowest fees of any employer sponsored retirement system available. According to the TSP website , the average net expense during was 3.
TSP Investment Options
That means the management cost was was. These are all very strong reasons for feds to participate in the TSP during the growth phase of their retirement plan. These are key triggers that should encourage federal employees to research the best options for their personal needs. The low cost of the TSP is the number one driving force for keeping retirement savings in place.
But, what price are feds paying for this low costs? There are several important pieces to a retirement plan within the TSP going unaddressed. The reason they go unaddressed is to keep costs low. This is a very good question, arguably the most vital question a person could ask about their retirement savings. They are not given the budget to hire the staff that could provide such answers. That cost would have to passed on to the overall cost of investing in the TSP.
Most feds I speak with indicate great difficulty in finding reliable information on how they should invest and how to plan financially for retirement. Many federal employees state that the endorsed training they receive starts late in their careers and is incomplete. Within the TSP, there are only 4 index funds to choose from. Even the Lifecycle Funds are merely a mixture of those same 4 index funds. This is a problem for anyone desiring greater diversification.
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This type of limited diversification may create a hole in a comprehensive retirement plan seeking personal balance. As of now, no additions have been applied. Why is this important? A more robust collection of options may allow feds to expand their retirement savings in both breadth and scope. Mutual funds would cost more than the current mix of index funds. Cost basis is a key component in tracking the gains you are receiving in an investment. This tells how much that investment originally cost.
Without a starting point, it is virtually impossible to determine true rate of growth. The TSP system does not track this for you. This simple feature is not included in the TSP because it would cost money to install it.
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For many feds, it becomes difficult to distinguish between deposit growth from investment growth. That means a manual change would need to be completed each time anything happens in your TSP, i. Low costs are the reason for this lack of a modernized feature. The biggest complaint I hear from retired federal employees concerns their withdrawal options. Brooke, I agree that it is a pain to transfer or rollover k plans with every PCS, but that is a much better option than cashing it out! The penalties are ferocious! It would work great until there was a need to split the money later.
In other words, if we contribute to a traditional IRA during a year, file taxes, and wait to the money to clear as being eligible for rollover, we can sink this money into our TSP. Why would we do so? Romeo, thanks for the information. You are correct, you can make rollover contributions to your TSP under some circumstances. For example, I still have my TSP, but I cannot make contributions to the account with money earned elsewhere.
Thanks for the comment! No problem. Like I said, I just learned it myself. I would still like to have the money earn without envolving too much risk. If it is the IRA, which one, Roth or traditional. Hi Pete, The G fund is government bonds, which have the lowest risk and lowest fees out of the various Thrift Savings Plan funds. If you are happy with that in your portfolio, then there is no reason to move your funds from the TSP to an IRA or other retirement account. Please keep in mind that it is impossible to give perfect advice based on the amount of information you have provided.
Since you have just retired, this would be a great time to visit with a financial planner to go over your portfolio and investments to give you an idea of how long your investments will last and if there is a more optimal way to invest your funds. You can read more about finding a financial advisor , and interviewing a financial planner.
Regarding rolling your funds over into an IRA, this will depend upon your investment goals. If you want more control over your investments, then an IRA is the way to go. If you want the lowest risk and lowest fees, then the G Fund is about as stable and low cost as you can get. The question regarding a Roth or Traditional IRA is best determined first by deciding if you should roll your TSP into an IRA, then looking at your total financial portfolio to determine how most of your investments are taxed, when you will need the money, and other factors.
This is an advanced topic, and one you should take to a professional financial advisor if you decide to roll your TSP into an IRA. It may not feel like you are losing money but if your G Fund is yielding say 1.
Hope this helps you as you consider leaving money in G funds while in a low interest rate environment. Take advantage of this. Austin, it seems like there is a misconception with your statement. Military members can contribute the same amount to an IRA as anyone else. The civilian equivalent would be a k. The limits for ks and and the Thrift Savings Plan are the same.
In other words, the plans available to military members and civilians are similar in the following ways: both can contribute the same amounts to IRAs, and the civilian k plan and the military or civil service Thrift Savings Plan have the same contribution limits. Yes, it would have been nice if I could have added to it after leaving Civil Service under the CSRS a decade ago; however, what is there still grows back. More important a change to the withdraw methods would be nice. I took a sum out years ago to fund a property.
Now, I can only withdraw the total amount when I want to withdraw funds. Multiple withdraws at my discretion would be good. The TSP is lacking in other capacities. This is BS! You are upset because TSP does not easily support market timing. Rather, investors should develop a long-range approach to investing and stick to it, without going in and out of various funds.eqihicaqiw.ga
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I invested in the plan before i understood it was unlike a traditional IRA or investment. I was told it was exactly the same…. I am still in Military service and would like to invest my funds elsewhere and have been told i cannot withdraw the money and put it into a different account.
See my comment to Marty above.
Where else can you get such a low cost, which promotes a higher retirement nest egg as the years go by? Carefully compare the costs charged by others before concluding that TSP is a scam. I have one son in the army now and one son going in the Army next month. They have been looking into TSP. Hello Martha, Thank you for contacting me. If they are just starting out and this is their only investment, then I would start with an L-Fund, which is a LifeCycle fund that automatically rebalances based on a set asset allocation.
This makes it easy to have a diversified investment portfolio without having to do much work. This is a great starting point for beginning investors. But I would encourage them to take the opportunity to learn more about investing so they can make more informed decisions in the long run. I hope this is helpful! Do no put a single cent in it unless they are providing matching contributions. Imagine your employer has a bank that you use…you put money in and pay them a fee to manage TSP fees are low — great! However, as long as you still work for that employer you cannot take any money out of their bank.
That is how the TSP works at least for the uniformed services.
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The law allows both as do most employers Ks and any legit financial institution.
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