As a Thrift Savings Plan investor, what should you worry about? You might be surprised that my list doesn’t include whether to contribute to the Roth or traditional accounts, or that you’ll have to begin taking distributions someday, if you aren’t already. Here is my list of things worth worrying about: Political meddling. The greatest threat to the TSP, as an institution, comes from members of Congress. The TSP contains nearly $400 billion. It’s the juiciest single profit target for the financial services industry. So far, they’ve had to go after it one retired investor at a time, but they…
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Q. I am 64 and have 4.5 years in FERS. I want to know when i can fully withdraw my TSP? I have asked the base. I have called BEST and I have called OPM. I was told DFAS submits a code in an internal software system. So does that happen six months down the road when my disability retirement is approved?
Q. I am thinking about taking a partial withdrawal of my TSP and moving it into an IRA account. My question is, the fees that are incurred when the IRA manager buys and sells positions within the IRA, how are they accounted for? For example, I move $100,000 to a simple IRA managed by my broker. He invests the $100,000 but in doing so his fee is, say $1,000, where does the $1,000 come from? For that matter, what about any future rebalancing within the IRA?
Who should you trust to manage your life savings? Your employer has put the job of managing your Thrift Savings Plan account, which might be the bulk of your life savings by the time you retire, squarely on your shoulders. Unfortunately, many participants invest their trust in the wrong sources and wind up suffering the consequences. The fact is that a trusted source is not the same as a trustworthy one, and knowing the difference is critical to your financial well-being. Before you place your trust in any investment or other financial advice, you should evaluate the source of that…
Much attention is focused on constructing cost- and risk-efficient investment portfolios. The Thrift Savings Plan does an excellent job of supporting this effort by offering only ultra-low cost index funds, and preconfigured asset allocation models, in the form of the L Funds, that are carefully engineered to provide the maximum expected rate of return for varying levels of investment risk. In fact, it offers everything you need to build a superior portfolio — one that can be expected to outperform anything else out there. A cost- and risk-efficient portfolio is essential to any plan that seeks to maximize the lifetime…
Why shouldn’t you trust your money to a broker or agent who claims to be able to successfully pick winning stocks or funds? Let’s say you have $100,000 to invest. An investment manager – a mutual fund manager, stock broker or private account manager – will offer, for a fee, to manage your money. That is called active professional investment management. The typical fee for this management is 1 percent of the account’s balance per year, but this rate can vary widely and often runs up to 1.5 to 2 percent. Mutual fund managers typically take their fee daily, while…
Negativity towards bonds, particularly Treasury bonds, has been peaking lately. For TSP investors, this may often mean avoiding the F Fund, which represents the aggregate United States bond market, and is the only bond fund available in the TSP. But what about the G Fund? While the G Fund’s return is based on that of Treasury bonds, your investment in the fund is otherwise unlike a bond investment. Bonds bear the risk of loss. The G Fund does not. It’s like cash that pays a high rate of interest, not like a bond that might produce a positive or a…
In my May 7 column, I pointed out five investing mistakes you should avoid to optimize your retirement income. In this column, I’ll discuss five more. Excessive costs. Index funds offer a return at a low cost. This is particularly true through the Thrift Savings Plan, where the cost of participating in the market’s return has been about 1/20th of 1 percent in recent years. It is not uncommon to find investors in retail brokerage accounts paying 2 percent, or more, for the privilege of investing their money. In vehicles like variable annuities and life insurance, the costs can reach…
Judging by the enthusiasm I’ve seen, some Thrift Savings Plan participants clearly believe that the new Roth option will be the solution to any and all retirement income problems. The option is set for launch as early as April, with whatever benefits it might produce. TSP has promised additional details as the availability date draws closer. Right now, you can get a peek under the hood on the TSP website. The Roth TSP option will allow you make deferrals of after-tax dollars from your paycheck into the plan. If you meet the requirements, which include being at least age 59½…
Q. I want to take a lump-sum partial payment at retirement and leave the remainder in my Thrift Savings Plan for the future. When I decide to start taking disbursements from my TSP, can I take them as partial monthly payments and adjust the monthly amounts on an annual basis? A. Yes, you may. However, monthly payments are considered a method of full, rather than partial, withdrawal.