The Daily Debrief Reports: TSP participation continues to increase

The Thrift Savings Plan has grown over the years, which means good things for all investors.

Tom Trabucco is Director of External Affairs for the Federal Retirement Thrift Investment Board and talked more about the positive effects of growth.

"The good news on this is that federal and postal employees and members of the uniformed services are sticking with it. Throughout all of the ups and downs and throughout all of the changes that we've had over the last three or four years, the participation in the TSP just continues to grow."

Trabucco said that one example of why growth is good has to do with some of the end-of-year numbers over the past four years.

"At that point [four years ago], we had $173 billion on account and 3.5 million participants. Looking at those numbers today, we have grown to $234 billion on account and 4.2 million participants. So, there's a growth of 700,000 participants in less than four years, and, of course, somewhere in the neighborhood of $50 to $60 billion -- and that's including the terrible months of about a year ago."

Despite those numbers, however, Trabucco said that most participants' accounts have not recovered to pre-recession levels.

"Depending on how you are invested, you may still be down 10 percent or so. Nevertheless, it was a real wake-up call to remind people that these investments don't just go up and, if they go down, it's not always just a dip."

Age matters, as well. Trabucco said an investor in his or her 50's might put money into different accounts, as compared to an investor in his or her 20's who is just starting out. There is one aspect of investing, though, that he said everyone should keep in mind.

"Diversify. Diversification is the only way, really, to protect yourself and, frankly, even classic diversification in this last downturn was not useful for many people because you had . . . two bubbles -- the real estate bubble, as well as the stock bubble. So, those are two completely separate investments that both suffered during that period. Fortunately, for federal employees, we do have the G fund."

He added that you have to carefully examine the choices available to you within the TSP and, more broadly, the entire investment community.

There is also the concept of being more careful as you get closer to retirement. Trabucco said there is a lot to be said for those who become more protective of their assets as the time draws near for them to start relying on the TSP and other investments for income.

For federal employees, this might be a bit easier than for those not able to participate in the TSP.

"If you wanted to put it on automatic pilot, we do have that. We have that in the L funds. You can just select the L fund that's appropriate for your retirement plan -- you pick the date that's close to when you're going to be drawing down your funds, and you can invest all of your money in that -- and in that particular L fund -- and, automatically, it will be readjusted every day to make sure that you stay on the correct glide path toward retirement. And, as you get closer to the retirement date -- or the date that you've selected for the draw-down -- it becomes more conservative."

Another advantage to the TSP -- and a possible reason for why so many feds choose to invest in it -- has to do with the lower fees when compared to many private sector options.

"We've tried to make it simple so that people can understand how much they're actually paying in total. There aren't a lot of fees and charges that are indecipherable; rather, we make it all clear, tell you what the current cost is -- we don't know what future costs are going to be -- we present it in a way that you can apply it to your own account balance and determine very easily how much you are paying to invest in the TSP."

The TSP is currently running a bit over two basis points, which Trabucco said means an investor is paying 20 cents per $1,000 of account balance.

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