A look at the fees and expenses associated with the upcoming TSP mutual fund window – will it be too expensive to be worth it?
With the new mutual fund window looming, TSP participants are probably asking themselves, “is it worth it?” The answer is, well, it depends. Let’s review the cost, based on what information TSP has released so far-
- There is a minimum initial transfer of $10,000 required to access the new investment options.
- Only 25% of a TSP account can be invested in the mutual fund window.
- If you have a balance of $39,999.00 or less, you can’t access the new investment options anyway, based on the above two rules alone.
- There is an annual fee associated with the window: $95. Every three years, TSP will assess this fee (and that means it might increase based on that assessment).
- There’s another fee associated with accessing the window: $55. This is a one-time fee, but like the annual expense, it could increase.
- We’re not done with fees yet. There is also a per-trade expense of $28.95. (So once a TSP participant accesses the new window, they’ll have paid $178.95, and that’s only if they do one trade to invest in one of the thousands of available mutual funds. To invest in five of these funds, after paying the initial $150, there’d be an additional $144.75 on top of that, bringing the total to $294.75.)
- And lastly, there is still one more expense to consider – whatever fund, or funds, a TSP participant invests in, there are expenses (typically less than 1%) associated with each individual fund.
So Is It Worth It?
The most important thing to realize, for the new investment options to be worth it, they need to outperform the existing TSP funds (G, F, C, S, and I), which is where that money would’ve been invested otherwise and make up for the extra expenses involved. However, because there will a purported thousands of mutual funds to choose from, it is not going to be a straightforward choice. You’ll either need a good financial advisor on your side to help you choose funds, a personal (and extensive) knowledge of investments… or blind luck (and if you’re feeling lucky, all I can say is retirement money is never an asset one should gamble with.)
Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees and members of the uniformed services, including the Ready Reserve. The TSP is a defined contribution plan, meaning that the retirement income you receive from your TSP account will depend on how much you (and your agency or service, if you’re eligible to receive agency or service contributions) put into your account during your working years and the earnings accumulated over that time. The Federal Retirement Thrift Investment Board (FRTIB) administers the TSP.
Investors should carefully consider the investment objectives, risks, charges and expenses of mutual funds before investing. The prospectus and summary prospectus contains this and other information about mutual funds. The prospectus and summary prospectus is available from your financial advisor and should be read carefully before investing.