Recent changes in the Thrift Savings Plan give savers more investment options, more electronic tools and easier access to their accounts.
Here’s what you need to know:
In addition to the traditional TSP funds, there’s a new mutual fund window that offers thousands of mutual fund choices.
But there are costs:
- $55 annual fee
- $95 annual maintenance fee
- $28.75 fee per trade
- Any additional fees and expenses that the individual mutual fund may have.
That adds up to at least $179 a year, if you make just one trade a year. These fees apply just to the new mutual fund window and are being imposed to avoid indirectly increasing costs for TSP participants who don’t use the mutual fund window, according to the Federal Retirement Thrift Investment Board, which administers the plan. The costs for TSP funds have traditionally been lower than most other investment programs.
If you choose to invest through the mutual fund window, your initial investment must be at least $10,000, and you can’t invest more than 25% of your total account in the mutual fund window.
That means you must have at least $40,000 in your TSP account. That may be at the nine or 10 year mark of service for enlisted members who are contributing 5%; and for officers, maybe at year six, according to JJ Montanaro, a certified financial planner who is relationship director on the Military Affairs team at USAA.
“The higher expense ratios of the mutual funds can be off-putting, but if that’s what you’re trying to do, and as long as you do it the smart way, then I don’t think those expenses are prohibitive,” Montanaro said. “The stated goal is that providing this option isn’t going to increase the cost for the rest of the folks in the TSP.”
There’s always the option to invest in mutual funds elsewhere, in an IRA, for example, or outside a retirement account.
Among other changes:
- There’s a new TSP mobile app available for download in the Apple App Store and the Google Play Store,
- Participants can use features such as electronic signatures; receiving payments through direct deposit to your bank account or by check.
- There’s access to a virtual assistant through the website or on the mobile app.
Investors must remember that the thousands of mutual funds available haven’t been vetted by the Federal Retirement Thrift Investment Board, said Gerri Walsh, president of the FINRA Investor Education Foundation. She suggest investors use FINRA’s fund analyzer, a tool that provides information about the fund, its objectives and the costs.
“You can see the impact a higher expense ratio will have on the value of your account if you’re considering similar mutual funds,” she said. “Fees add up. None of us can control what happens in the market, and we can’t control the performance.
“But we can control our costs. So if you are investing through the mutual fund window, you will set up separate accounts through TSP, and then you’ll have those choices available. And to help you determine which choices are right for you, you might consider using the fund analyzer tool.”
The tool is available at FINRA.
For detailed information about the changes, visit the TSP site.
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.