TSP vs. IRAs


Q. Could you provide your opinion about the pros and cons in transferring IRAs into the TSP, or keeping them separate? I understand that the costs are much less in the TSP. However, withdrawal options are more flexible in IRAs, and IRAs provide another diversification capability.

A. The pros are low cost, the G Fund, simple and efficient design, ease of management and superior risk-adjusted returns. The con is limited withdrawal options. The diversification possibilities in an IRA are largely irrelevant, since the TSP’s funds adequately cover the investment world. What most people call diversification is actually concentration. The TSP’s attributes make it the best retirement investment vehicle that exists, period. Dealing with the withdrawal restrictions is a small price to pay for such a great investment environment.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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