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More TSP Funds: Good Idea/Bad Idea?
Monday - 9/27/2010, 4:00am EDT
If you picked the umbrella, you can stop right here. Oh, and have a nice life!
If you picked "bucket" instead of umbrella you'll understand the eagerness of various mutual funds that are constantly trying to get inside the federal Thrift Savings Plan. Naturally, they'd like a piece of the action and some of the dollars federal and postal workers invest monthly, via payroll deduction, in their federal 401(k) accounts.
For years the people who run the Federal Thrift Investment Board have resisted efforts of mutual funds and their often powerful political supporters to become one of the options available to the 3 million plus people with accounts.
Currently the TSP offers three index funds (C, S and I) that cover the U.S. and international markets, the bond indexed F fund, a special feds-only U.S. Treasury securities (G) fund. Plus five so-called lifecycle funds that are made up of the C, S, I, F and G funds.
Over the years, politicians have pushed the Board to offer a gold-fund, a socially-conscious fund, a green fund, a minority-business fund, etc. One member of Congress proposed a dot.com fund about six months before the dot.com world crashed and burned earlier this century.
Six years ago (when the housing /commercial real estate market was hot,) powerful politicians and the real estate industry pushed for a REIT (real estate investment trust) fund for the TSP.
Just last week Rep. Jim Langevin introduced (for the third time) his bill requiring the TSP to offer federal and postal investors a "socially responsible" fund.
Backers of the TSP status quo say that Congress intended it as a long-term, low-cost supplemental investment option, with minimal risk. In fact most of the money feds have invested in the TSP is in the super-safe never-has-a-bad day G-fund. Its rate of return is set and guaranteed by the government. And while its rate of return is low, it never posts a loss.
Also, they argue, the funds available to TSP investors do have a representation in most of the markets people want/need in their portfolios.
But there are feds who think they could do better if given more investment options such as a precious metal fund, or country-specific funds targeted at fast-growing economies such as China, Brazil or India.
There is a possible compromise:
Over a year ago Congress authorized the TSP to open a window during which time investors could move a portion of their account balances into outside mutual funds. Both the TSP advisory board and a watchdog group composed of federal employee unions and organizations are split on the idea. Or how to do it.
Would it be a one-shot opportunity? Or could people continue to make outside investments via payroll deduction. How much of their TSP balance could investors transfer to outside funds? Who would pay the higher fees charged by the outside funds. And which funds would be tapped for the program? Who defines what is a "socially responsible" fund?
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Best Date To Retire
That's one of the many topics of today's For Your Benefit radio show here on Federal News Radio. Benefits expert Tammy Flanagan, tax guy Bob Leins and I, will also tackle and talk about upcoming changes in the federal health benefits program, taxes, pending legislation and a backlog in retirement claims. That's at 10 a.m. (EDT) and you can listen at www.federalnewsradio.com or in the D.C. area at WFED 1500 AM.
Nearly Useless Factoid
by Suzanne Kubota
According to NationalGeographic.com, the oil spill in the Gulf of Mexico has "sparked an explosion of sticky clumps of organic matter." Scientists call these clumps "sea snot."
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Seasonal TSP investing explored
The TSP Center has announced it's come up with something called a Seasonal Strategy for TSP investing, which it claims results in higher returns by moving your funds six times a year. Federal News Radio went straight to the TSP's Tom Trabucco and asked if a seasonally-based investment strategy would work.
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