Improving the TSP [for current participants]

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Re: Improving the TSP [for current participants]

Postby placeholder » Fri Dec 19, 2014 1:15 pm

MichDad wrote:
PoppyA wrote:Late to the discussion. I wish for a Stop-Loss option. Perhaps a roll over to the G fund when things slide south.

That's a very interesting idea that I never thought of before. Thank you for suggesting it. I wonder whether anyone has ever suggested it to the FRTIB before. I've never seen it discussed in their monthly minutes.

I've never heard of any other qualified plan that offered something like that and would likely be expensive to implement not to mention the inevitable problems when you get a volatile market and a bunch of these execute on a down day or two that followed but a big recovery (like the last week) and people get stuck out of the stock market and start complaining.

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Re: Improving the TSP [for current participants]

Postby PoppyA » Fri Dec 19, 2014 1:45 pm

placeholder wrote:
MichDad wrote:
PoppyA wrote:Late to the discussion. I wish for a Stop-Loss option. Perhaps a roll over to the G fund when things slide south.

That's a very interesting idea that I never thought of before. Thank you for suggesting it. I wonder whether anyone has ever suggested it to the FRTIB before. I've never seen it discussed in their monthly minutes.

I've never heard of any other qualified plan that offered something like that and would likely be expensive to implement not to mention the inevitable problems when you get a volatile market and a bunch of these execute on a down day or two that followed but a big recovery (like the last week) and people get stuck out of the stock market and start complaining.


"Buyer beware"

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Re: Improving the TSP [for current participants]

Postby placeholder » Fri Dec 19, 2014 4:09 pm

PoppyA wrote:"Buyer beware"

"Class action lawsuit".

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Re: Improving the TSP [for current participants]

Postby MichDad » Fri Dec 19, 2014 4:46 pm

placeholder wrote:
PoppyA wrote:"Buyer beware"

"Class action lawsuit".


If the risks and costs are properly and clearly disclosed, I don't see the basis for a class action lawsuit. Speaking of costs, if the Stop-Loss option would be expensive to implement, the FRTIB could pass those costs on to those who choose it. Are there large 401(k) plans that offer a Stop-Loss option? If so, how is it implemented? Are there special fees associated with it?

MichDad

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Re: Improving the TSP [for current participants]

Postby abuss368 » Mon Apr 27, 2015 9:28 pm

MichDad wrote:At its November 2014 meeting, the FRTIB approved a mutual fund window ("MFW") concept for the TSP. Here are links to: (1) the FRTIB's minutes on this topic (see item 5.b.); (2) the memo from the TSP's Executive Director recommending a MFW; and (3) his accompanying PowerPoint presentation.

http://www.frtib.gov/MeetingMinutes/2014/2014Nov.pdf
http://www.frtib.gov/pdf/minutes/MM-2014Nov-Att8.pdf
http://www.frtib.gov/pdf/minutes/MM-2014Nov-Att9.pdf

Personally, I don't think we need a MFW for the TSP. The FRTIB can do several other things to better improve the TSP.

MichDad

EDIT: I've slightly edited the last sentence by breaking it up into two separate sentences for clarity.


If I read that correctly, they are considering real estate, emerging markets, and social responsible funds?
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Re: Improving the TSP [for current participants]

Postby Ketawa » Mon Apr 27, 2015 10:15 pm

abuss368 wrote:If I read that correctly, they are considering real estate, emerging markets, and social responsible funds?


Emerging markets, real estate, and socially responsible funds were mentioned as three asset classes that are often requested for inclusion in the TSP fund lineup. They were used to illustrate the effect of applying a screen based on expense ratio to limit the funds that might be accessible through a mutual fund window (MFW), and the notes indicate that the FRTIB would probably not include such a screen in the MFW.

In all likelihood, the funds available through a MFW would be the same lineup available through a typical self-directed brokerage window in a 401k. Both Vanguard and Fidelity offer such products. Here are some numbers from an older news article:

That doesn't mean your typical investor is eager to get behind the steering wheel. While 23 percent of Vanguard's 401(k) participants are offered a brokerage option, only 1 percent use it, the firm says. Fidelity says 38 percent of its participants have a brokerage window, but that only 2.4 percent use it.

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Re: Improving the TSP [for current participants]

Postby MnD » Tue Apr 28, 2015 7:39 am

4. Allow TSP account holders to change their withdrawal options at least annually. For example, we should be permitted to take out different lump sum amounts anytime.

I took some training recently and the adviser said the way to do this is to select monthly distribution for your recurring desired amount but then at the end of a given year you want your lump sum, set monthly to the amount of your lump sum distribution. Collect that for one month and meanwhile change it back to your regular amount you desire for January. It had some cut-off dates involved for submitting forms but it did seem like a way to "hack" the system to get lump sums out just using the monthly distribution tool. It works because there's no upper limit on your monthly withdrawal amount.

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Re: Improving the TSP [for current participants]

Postby yakers » Wed Apr 29, 2015 12:00 am

MnD wrote:4. Allow TSP account holders to change their withdrawal options at least annually. For example, we should be permitted to take out different lump sum amounts anytime.

I took some training recently and the adviser said the way to do this is to select monthly distribution for your recurring desired amount but then at the end of a given year you want your lump sum, set monthly to the amount of your lump sum distribution. Collect that for one month and meanwhile change it back to your regular amount you desire for January. It had some cut-off dates involved for submitting forms but it did seem like a way to "hack" the system to get lump sums out just using the monthly distribution tool. It works because there's no upper limit on your monthly withdrawal amount.


I am not aware of this as an option, I thought I could ONLY make one change to the monthly withdrawal amount each year. Where can I find details that would allow this?

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Re: Improving the TSP [for current participants]

Postby abuss368 » Tue May 19, 2015 12:52 pm

Excellent thread and very good responses.
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Re: Improving the TSP [for current participants]

Postby mxs » Tue May 19, 2015 3:48 pm

PoppyA wrote:Late to the discussion. I wish for a Stop-Loss option. Perhaps a roll over to the G fund when things slide south.


Are you unable to make allocation adjustments when you are retired?

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Re: Improving the TSP [for current participants]

Postby OutInThirteen » Tue May 19, 2015 7:44 pm

mxs wrote:
PoppyA wrote:Late to the discussion. I wish for a Stop-Loss option. Perhaps a roll over to the G fund when things slide south.


Are you unable to make allocation adjustments when you are retired?


You can always make allocation adjustments, even when retired. However, you're still limited to two interfund transfers per month, except you can make as many transfers into the G Fund per month as you'd like.

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Re: Improving the TSP [for current participants]

Postby mxs » Tue May 19, 2015 9:26 pm

That is what I thought. So is this "Stop-Loss" idea just an automated way to time the market when things go bad? When would it or you know when to get back out of the G fund? Sounds like a bad idea, and something I highly doubt that they would add/implement, if I am understanding it correctly.

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Re: Improving the TSP [for current participants]

Postby Jerry55 » Tue May 19, 2015 11:54 pm

Like Most, if not ALL plans, the TSP is not "One Stop Shopping".

I've been in the TSP as far back as you (1988 or so), recently retired @ age 57 in 2012.
The Low cost is because of the limited choices. One has the Option of moving to other Fund Carriers.
To Increase the options, would be to increase the fees. If you look at the options involved in other companies,
you'll see the same evidence. I'm Happy with the choices involved, and If I want more choices ? I'll move on.

Think about other choices, and incur the associated fees on your own.
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Re: Improving the TSP [for current participants]

Postby trueblueky » Wed May 20, 2015 8:33 pm

Jerry55 wrote:Like Most, if not ALL plans, the TSP is not "One Stop Shopping".

I've been in the TSP as far back as you (1988 or so), recently retired @ age 57 in 2012.
The Low cost is because of the limited choices. One has the Option of moving to other Fund Carriers.
To Increase the options, would be to increase the fees. If you look at the options involved in other companies,
you'll see the same evidence. I'm Happy with the choices involved, and If I want more choices ? I'll move on.

Think about other choices, and incur the associated fees on your own.

+1
I stay in TSP for extremely low-cost index funds, the G Fund. If TSP sends employees email at critical career points, such as when they begin service, that sounds useful.

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Re: Improving the TSP [for current participants]

Postby MnD » Thu May 21, 2015 7:42 am

yakers wrote:
MnD wrote:4. Allow TSP account holders to change their withdrawal options at least annually. For example, we should be permitted to take out different lump sum amounts anytime.

I took some training recently and the adviser said the way to do this is to select monthly distribution for your recurring desired amount but then at the end of a given year you want your lump sum, set monthly to the amount of your lump sum distribution. Collect that for one month and meanwhile change it back to your regular amount you desire for January. It had some cut-off dates involved for submitting forms but it did seem like a way to "hack" the system to get lump sums out just using the monthly distribution tool. It works because there's no upper limit on your monthly withdrawal amount.


I am not aware of this as an option, I thought I could ONLY make one change to the monthly withdrawal amount each year. Where can I find details that would allow this?


What she described seemed to be if you haven't made an annual change in a given year yet, "using up" your change late in the year for one month only then switching back, using your one-time change early in the next year. So in theory you could get a "lump sum" like big monthly payment out in December. I don't think she's correct however given what I read about changing monthly withdrawals. She was wrong about the I fund composition and someone who is using her for retirement planning said she encourages retirees to roll over TSP funds to an IRA. So the usual conflict of interest type.

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Re: Improving the TSP [for current participants]

Postby MnD » Thu May 21, 2015 7:52 am

Jerry55 wrote:Like Most, if not ALL plans, the TSP is not "One Stop Shopping".

I've been in the TSP as far back as you (1988 or so), recently retired @ age 57 in 2012.
The Low cost is because of the limited choices. One has the Option of moving to other Fund Carriers.
To Increase the options, would be to increase the fees. If you look at the options involved in other companies,
you'll see the same evidence. I'm Happy with the choices involved, and If I want more choices ? I'll move on.

Think about other choices, and incur the associated fees on your own.


Simply changing the I Fund to a Total International Index would allow TSP'ers to replicate the three fund portfolio without "going elsewhere".
The fund has the authority to change the index right now.

The costs to replicate the three fund portfolio now for TSP'ers currently entail 5 funds and a significant degree of complexity, outside financial resources, time and opportunity for error. It also gives "pitchmen" from outside firms a legitimate criticism of the TSP and one that is probably helpful to them in convincing unsophisticated investors to move all funds out of TSP. It is not a given that a Total International Fund I fund would raise costs. Perhaps the TSP should solicit bids next round with a Total International index being a requirement and see where costs come in. If BlackRock isn't up to the task, perhaps Vanguard would be. Would that be an unhappy outcome?

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Re: Improving the TSP [for current participants]

Postby Jerry55 » Thu May 21, 2015 9:23 am

MnD wrote:Simply changing the I Fund to a Total International Index would allow TSP'ers to replicate the three fund portfolio without "going elsewhere".
The fund has the authority to change the index right now.

The costs to replicate the three fund portfolio now for TSP'ers currently entail 5 funds and a significant degree of complexity, outside financial resources, time and opportunity for error. It also gives "pitchmen" from outside firms a legitimate criticism of the TSP and one that is probably helpful to them in convincing unsophisticated investors to move all funds out of TSP. It is not a given that a Total International Fund I fund would raise costs. Perhaps the TSP should solicit bids next round with a Total International index being a requirement and see where costs come in. If BlackRock isn't up to the task, perhaps Vanguard would be. Would that be an unhappy outcome?


Uhh, No it would not be an unhappy outcome. It depends on what one wants to do. I'm not into this 3 or 4 fund portfolio. For those looking at that option, that would be great. I'm in these funds for personal reasons, and I'd suggest the same for everyone else. If it's right for them ? Go for it.

For me overall ?

30% C fund,
13% S fund,
13% I fund,
20% rIRA (Wellesley),
14% Wellington (taxable)
10% Dodge & Cox International (taxable)

Could it be that by BlackRock limiting the choices is how they keep ER low ??? Possibly.
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Re: Improving the TSP [for current participants]

Postby abuss368 » Thu May 21, 2015 10:36 am

Jerry55 wrote:Uhh, No it would not be an unhappy outcome. It depends on what one wants to do. I'm not into this 3 or 4 fund portfolio. For those looking at that option, that would be great. I'm in these funds for personal reasons, and I'd suggest the same for everyone else. If it's right for them ? Go for it.

For me overall ?

30% C fund,
13% S fund,
13% I fund,
20% rIRA (Wellesley),
14% Wellington (taxable)
10% Dodge & Cox International (taxable)

Could it be that by BlackRock limiting the choices is how they keep ER low ??? Possibly.


Hi Jerry,

Interesting post. Your portfolio appears very simple. I would like to ask you about your bond allocation. Do you hold any bonds outside of Wellesley and Wellington? Does it bother you at all that Wellington holds taxable bonds in your taxable account or is the simplicity the most important part with one fund?

Best.
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Re: Improving the TSP [for current participants]

Postby Jerry55 » Thu May 21, 2015 12:34 pm

abuss368 wrote:Hi Jerry,

Interesting post. Your portfolio appears very simple. I would like to ask you about your bond allocation. Do you hold any bonds outside of Wellesley and Wellington? Does it bother you at all that Wellington holds taxable bonds in your taxable account or is the simplicity the most important part with one fund?

Best.


I try and keep it simple. I retired in 2012, and closed my Harbor Bond and Dodge & Cox Bond Fund in 2011 or so,
moved into the VCP then converted to a Roth IRA (Wellesley) in March 2012.
Sold Harbor Hi Yield 12/14 and invested into Wellinton, so I've reduced my taxable bond holdings significantly. I don't mind paying about 18% tax on it's earnings, as IL does not tax them or my retirement... Instead of Bonds, I'm liking the idea of using the TSP G fund for "Bonds". With no risk of loss, and 2-4% returns hopefully in the future, I believe that to be a good use of the TSP. Only time will tell tho.

So, to answer your question.....No. That's my only bond holdings in the two Vanguard accounts. Between those 2 accounts, it's about 50/50 Stocks/Bonds (~125K in bonds)

The TSP works well for those that want to use it....
However, the VCP conversion to ROTH IRA is what brought me to Vanguard. I kinda like it here now.
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Re: Improving the TSP [for current participants]

Postby Jerry55 » Thu May 21, 2015 2:17 pm

Jerry55 wrote:
abuss368 wrote:Hi Jerry,

Interesting post. Your portfolio appears very simple. I would like to ask you about your bond allocation. Do you hold any bonds outside of Wellesley and Wellington? Does it bother you at all that Wellington holds taxable bonds in your taxable account or is the simplicity the most important part with one fund?

Best.


I try and keep it simple. I retired in 2012, and closed my Harbor Bond and Dodge & Cox Bond Fund in 2011 or so,
moved into the VCP then converted to a Roth IRA (Wellesley) in March 2012.
Sold Harbor Hi Yield 12/14 and invested into Wellinton, so I've reduced my taxable bond holdings significantly. I don't mind paying about 18% tax on it's earnings, as IL does not tax them or my retirement... Instead of Bonds, I'm liking the idea of using the TSP G fund for "Bonds". With no risk of loss, and 2-4% returns hopefully in the future, I believe that to be a good use of the TSP. Only time will tell tho.

So, to answer your question.....No. That's my only bond holdings in the two Vanguard accounts. Between those 2 accounts, it's about 50/50 Stocks/Bonds

The TSP works well for those that want to use it....
However, the VCP conversion to ROTH IRA is what brought me to Vanguard. I kinda like it here now.
Retired 12/19/2012 @ age 57 | Good Bye Tension, Hello Pension !!!

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Re: Improving the TSP [for current participants]

Postby TimeRunner » Fri May 22, 2015 3:30 pm

Communication with TSP of 5/21/15 thru the "Contact Us" website Messaging Center:

Me: "Is there any updated information as to WHEN Traditional IRA to Roth IRA conversations will be implemented? This has long been on TSP's list of things to do, and I'm concerned that there has been little to no mention of it in FRTIB or TSP newsletters, reports, or press releases."

TSP: "In 2014, the TSP conducted a study on the merits and methods of allowing in-plan Roth conversions as well as other changes associated with the Roth TSP feature (such as allowing participants to elect to withdraw traditional accounts and Roth accounts separately rather than pro rata as is currently required under TSP rules). The results of that study are under review. However, should the TSP elect to allow in-plan Roth conversions and/or other Roth-related changes, it will require significant reprogramming as well as significant changes to our communication materials. While this will not deter us, the TSP is charged with acting in the best interest of our participants and is always looking for ways to meet the needs of our participants; we likely will not be able to implement any such changes in the near future.

We regret our response could not be more favorable, but hope this information is helpful. If you have further questions...."

Sounds to me like it is on the back burner. I'll be asking my Congresswomen to turn up the heat. I'm planning on retiring next year.
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Re: Improving the TSP [for current participants]

Postby M_to_the_G » Fri May 22, 2015 11:11 pm

Frankly, the TSP is already too complex for most feds, sadly.
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Re: Improving the TSP [for current participants]

Postby Info_Hound » Sat May 23, 2015 9:52 am

I just listened to this interview that discusses the latest actions, planned or otherwise, the TSP is implementing.

Seems they have gotten the message that their withdrawal options are driving participants to move funds to other firms.

http://www.federalnewsradio.com/722/3860452/Discussion-of-TSP-issues-by-the-people-who-know

This week on For Your Benefit, join hosts Bob Leins and Tammy Flanagan as they welcome Federal Retirement Thrift Investment Board Executive Director Greg Long and Director of External Affairs Kim Weaver to the studio.

Also in today's show:

* One of the monthly distribution options from the TSP allows for a reset of the monthly distribution amount each December for the coming calendar year. There was discussion that there could be two reset dates - one in December and one at the end of June. What is the current status?
* Will the TSP provide for state income tax to be withheld from distributions?
* Is it possible that the "mirroring effect" will be softened or eliminated with regard to Roth TSP distributions and their impact on traditional TSP distributions?
* Is there a TSP distribution choice that would allow specific distributions from specific funds under consideration?


It's slow listening but the content is worth it.

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Re: Improving the TSP [for current participants]

Postby MichDad » Wed May 27, 2015 9:50 am

The Federal Retirement Thrift Investment Board has posted the minutes of its April 20, 2015 meeting. Here's a quote from the minutes:

"Transfers out of the [Thrift Savings Plan] remain high, with over 740 million dollars leaving the plan in April as transfers to other retirement vehicles. Board Member Jasien expressed his concern about outgoing transfers, and asked when a discussion around a solution would take place. Mr. Long informed the Board that a discussion around withdrawal flexibility, one of three long term strategies the Agency is considering, would take place at the July Board meeting."

Here's a link to the minutes:

http://www.frtib.gov/MeetingMinutes/2015/2015Apr.pdf

MichDad

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Re: Improving the TSP [for current participants]

Postby Wayson » Wed May 27, 2015 1:08 pm

*cheers*

I'm heartened by the fact that the Board has finally begun to consider reforming/modernizing the TSP withdrawal mechanism. It's needlessly arcane and limited as it stands today, which is likely why the TSP is seeing outflows. My plan until now has been to roll over the non-G-Fund portion of my TSP to a Traditional IRA when I retired; it looks as though I wasn't the only one with that mindset.

I don't understand why TSP doesn't allow for participants to change their monthly distribution amount whenever they feel like it. It would only impact the next month's distribution, but it would allow people who forecast increased expenses (medical, travel, etc) to access their money when they needed it. It already works that way in reverse for adjusting our contributions.

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Re: Improving the TSP [for current participants]

Postby stan1 » Wed May 27, 2015 1:21 pm

I'd guess a lot of the money is leaving because retirees/departing employees want to day trade, stock pick, use active management, get their money out of the govmint's hands, or turn assets over to a AUM-based money manager. More flexibility on withdrawals isn't going to help with irrational fears, financial services industry marketing, or performance chasing. Bogleheads are a minority.

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Re: Improving the TSP [for current participants]

Postby warner25 » Wed May 27, 2015 2:32 pm

I agree with the above comments by stan1. When I've suggested to co-workers that the TSP should be taken seriously as a benefit of our employment, they have always been surprised and/or argumentative.

A few weeks ago a co-worker told me that he contributes because he feels (correctly) that he shouldn't waste the tax-advantaged space, but he is convinced that the TSP is a "racket," poorly run, and lacking adequate sophistication. He will roll his money over to a retail brokerage at the first opportunity in order to buy (and day-trade) individual tech stocks, emerging markets ETFs, precious metals funds, etc. and get (in his mind) superior returns with better service.

The problem here does not sit with the TSP.

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Re: Improving the TSP [for current participants]

Postby MnD » Wed May 27, 2015 3:32 pm

Some financially unsophisticated employees met individually with a financial planner who did some group TSP training recently and all went away from those individual meetings with wanting to move funds out of the TSP at retirement. It did not take detailed shortcomings of the TSP to sway them, just claiming that the TSP options in retirement are "very limited" and IRA's are so flexible, wonderful, powerful etc.

Personally the once-per-year monthly adjustment seems fine.
If you are so bleeding edge on retirement income that you need to make changes all the time you have bigger problems than annual adjustment limits.

The lack of a Total International fund is annoying for full-indexers, but can be compensated for without pulling funds out of the TSP assuming you have other accounts and funds to work with.

As the beneficiary of an inherited IRA that was originally my fathers then my mothers, I understand the benefits we have derived from it.
My only real major concern with leaving funds in the TSP is that were I to go first, my wife would be faced with the choice of having to manage a rollover to an IRA and then manage that account or lose the opportunity to have our children inherit the funds with the stretch-out IRA provisions. But that's true with all 401-K's versus rollover IRA's as I understand it, not just a TSP problem.

In a perfect world the TSP would have a Total International index such that a three fund portfolio can be supported and the Target date funds indexed all equities plus mainly a super-safe bond fund (G Fund). This would allow simplification of outside accounts since compensation for EM and SCI is no longer required. A provision would be made to allow surviving spouses to assume/keep the TSP account and designate beneficiaries such that children could inherit the TSP funds into inherited IRA accounts in the same manner they can do so now from parental IRA's.

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Re: Improving the TSP [for current participants]

Postby bayview » Wed May 27, 2015 5:30 pm

I could grit my teeth and put up with the I fund and the awkward distributions, if they'd just get the Roth conversion option going.

Selfish, I know :D, but that's what truly makes me crazy at this point. If I could convert all my TSP to Roth, I could probably resign myself to the RMD's (even on Roth TSP.)
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Re: Improving the TSP [for current participants]

Postby abuss368 » Fri May 29, 2015 11:23 am

What I found interesting was the Plan did not see a compelling case for investing in international bonds. While Vanugard is marketing and recommending this asset class, their research paper presented a middle of the road at best case for an investment.
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Re: Improving the TSP [for current participants]

Postby texasdiver » Fri May 29, 2015 1:02 pm

I suspect that the majority of people moving out of the TSP are doing so because they are being sold rollover IRA packages by persuasive salesmen, or they just want to do more slicing and dicing and invest more aggressively than the TSP allows. I suspect it has less to do with the limited withdrawal options but what do I know, that's just a guess.

I agree with changing the international fund to a true international index like Vanguard but that's about the only change that really interests me. Any serious investor with a TSP is also going to have outside account holdings in Roths or other accounts and should have plenty of space to play with more targeted investments than the TSP provides.

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Re: Improving the TSP [for current participants]

Postby MnD » Sat May 30, 2015 8:24 am

bayview wrote:I could grit my teeth and put up with the I fund and the awkward distributions, if they'd just get the Roth conversion option going.

Selfish, I know :D, but that's what truly makes me crazy at this point. If I could convert all my TSP to Roth, I could probably resign myself to the RMD's (even on Roth TSP.)


I'm curious about this interest in Roth conversions. Feds have the pension and the pension supplement and SS eligibility when they opt to collect.
Do you expect to have any 15% bracket space at any time in retirement? We don't. Converting while working makes zero sense for us and converting post-retirement at best would be at the 25% bracket or higher depending on how much converted. And if we don't convert, we're looking at the 25% marginal bracket (and a much lower effective rate) for as far as I can reliably model out.

Tilting to spending from tax-sheltered in retirement if needed to fill up the 25% bracket would seem to accomplish anything that might be accomplished from Roth conversions. if the markets go gang-busters for the next 20 years I could forsee RMD's pushing some small % of income back into the 28% marginal bracket, but given that virtually all of our TSP went in at 28% or higher, I don't see that as some huge problem, especially given that it would arise in a situation of a much larger portfolio than currently expected.

Now if i had any 15% bracket space in retirement I'd be all over that for Roth conversions - but I won't.

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Re: Improving the TSP [for current participants]

Postby bayview » Sat May 30, 2015 9:01 am

MnD wrote:
bayview wrote:I could grit my teeth and put up with the I fund and the awkward distributions, if they'd just get the Roth conversion option going.

Selfish, I know :D, but that's what truly makes me crazy at this point. If I could convert all my TSP to Roth, I could probably resign myself to the RMD's (even on Roth TSP.)


I'm curious about this interest in Roth conversions. Feds have the pension and the pension supplement and SS eligibility when they opt to collect.
Do you expect to have any 15% bracket space at any time in retirement? We don't. Converting while working makes zero sense for us and converting post-retirement at best would be at the 25% bracket or higher depending on how much converted. And if we don't convert, we're looking at the 25% marginal bracket (and a much lower effective rate) for as far as I can reliably model out.

Tilting to spending from tax-sheltered in retirement if needed to fill up the 25% bracket would seem to accomplish anything that might be accomplished from Roth conversions. if the markets go gang-busters for the next 20 years I could forsee RMD's pushing some small % of income back into the 28% marginal bracket, but given that virtually all of our TSP went in at 28% or higher, I don't see that as some huge problem, especially given that it would arise in a situation of a much larger portfolio than currently expected.

Now if i had any 15% bracket space in retirement I'd be all over that for Roth conversions - but I won't.

We expect to be well within the 15% bracket with room to spare. We are not plagued with an embarrassment of riches. :D
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Re: Improving the TSP [for current participants]

Postby TimeRunner » Sat May 30, 2015 10:11 am

MnD wrote: Feds have the pension and the pension supplement and SS eligibility when they opt to collect.

If you are a FERS employee retiring shortly after age 62, not filing for SS until 70, pension only (plus investment income) in the 'tween years, that may be a very good window to do Roth conversions, especially if you careered in a high tax state and move to a low one, for example.
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Re: Improving the TSP [for current participants]

Postby VictoriaF » Tue Jul 28, 2015 11:00 am

TimeRunner wrote:
MnD wrote: Feds have the pension and the pension supplement and SS eligibility when they opt to collect.

If you are a FERS employee retiring shortly after age 62, not filing for SS until 70, pension only (plus investment income) in the 'tween years, that may be a very good window to do Roth conversions, especially if you careered in a high tax state and move to a low one, for example.


Exactly.

Thank you, TimeRunner, for the updates about the TSP Board deliberations.

Victoria
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Re: Improving the TSP [for current participants]

Postby trueblueky » Tue Jul 28, 2015 3:23 pm


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Re: Improving the TSP [for current participants]

Postby MichDad » Mon Aug 31, 2015 4:29 pm

The TSP has written to me with an update on my inquiry about the status of its Roth conversion issues. The news is not good. Here's a quote from the letter:

"The TSP continues to study the merits of a number of changes associated with the Roth TSP feature. These studies include allowing in-plan Roth conversions and allowing participants to elect to withdraw traditional accounts and Roth accounts separately, rather than pro rata, as is currently required under TSP rules. There is no timeline at this time for the consideration of these changes. Should the TSP elect to allow in-plan Roth conversions and/or other Roth-related changes, the TSP will evaluate the timing of these endeavors against other critical TSP upgrades and legislatively required changes and will schedule the changes as time permits. The TSP is charged with acting in the best interests of our participants and is always looking for ways to meet the needs of our participants. However, at this time we do not expect to implement any Roth changes in the next couple of years."

I don't know how it will be in the best interests of TSP participants for me and others similarly situated to make significant withdrawals from our accounts so we can convert regular TSP assets to Roth TSP assets within our IRAs. Given this letter, that's what I'll do, reluctantly, when I retire.

MichDad

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Re: Improving the TSP [for current participants]

Postby VictoriaF » Mon Aug 31, 2015 4:54 pm

MichDad wrote:I don't know how it will be in the best interests of TSP participants for me and others similarly situated to make significant withdrawals from our accounts so we can convert regular TSP assets to Roth TSP assets within our IRAs. Given this letter, that's what I'll do, reluctantly, when I retire.

MichDad


Thank you, MichDad,

I will make my first TSP withdrawal later this year. Considering your news, I will withdraw at the upper end of my estimates to accommodate more years of Roth conversions in Vanguard while waiting for the TSP to act. In a few years, after the initial conversions are completed, I will be prepared to withdraw the remaining funds and close the TSP account. This is very unfortunate.

Victoria
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Re: Improving the TSP [for current participants]

Postby TimeRunner » Mon Aug 31, 2015 7:57 pm

The number of TSP participants who want, much less understand, In-account Roth conversions is probably no more than 10,000 out of several million participants, and the number who have contacted TSP about it (including me) is probably under 100. I can understand why it's on their back burner, even if the 10,000 might have close to or more than 7 figure balances. Sadly, that's still a small fraction of total TSP assets.

Oh well, at least we had the benefit of TSP low costs during our working years. If we have to pay more in retirement in order to have the flexibility we need to manage our money, c'est la blankity-blank vie. Barring some better strategy, I'll be moving all other-than-G-fund allocation, both TIRA and Roth, to Vanguard in 2017.
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Re: Improving the TSP [for current participants]

Postby gkaplan » Mon Aug 31, 2015 8:47 pm

I still plan on keeping my TSP. I like having the G Fund option. Since I already am retired from federal service, over seventy, drawing Social Security, and in the twenty-five percent marginal tax bracket, I probably would chose not to convert my traditional TSP to a Roth TSP anyway, although it would be nice to have that option.
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Re: Improving the TSP [for current participants]

Postby rkhusky » Tue Sep 01, 2015 7:16 am

TimeRunner wrote:Oh well, at least we had the benefit of TSP low costs during our working years. If we have to pay more in retirement in order to have the flexibility we need to manage our money, c'est la blankity-blank vie. Barring some better strategy, I'll be moving all other-than-G-fund allocation, both TIRA and Roth, to Vanguard in 2017.


Keep in mind that if you have Roth assets in the TSP you will have to take RMD's from them. And you can't just withdraw the TIRA portion.

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Re: Improving the TSP [for current participants]

Postby Jerry55 » Tue Sep 01, 2015 9:54 am

I'm not sure, but I hear that one can take (almost) all funds from the TSP and put them into their respective

rIRA and tIRA funds @ Vanguard, have them separated, then move tIRA funds BACK into the TSP so that the

main holdings in the TSP are in a tIRA (maybe G Fund) and go from there.

I have no rTSP, but that's what I hear... Hopefully, it's a true statement.
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Re: Improving the TSP [for current participants]

Postby VictoriaF » Tue Sep 01, 2015 10:13 am

Jerry55 wrote:I'm not sure, but I hear that one can take (almost) all funds from the TSP and put them into their respective

rIRA and tIRA funds @ Vanguard, have them separated, then move tIRA funds BACK into the TSP so that the

main holdings in the TSP are in a tIRA (maybe G Fund) and go from there.

I have no rTSP, but that's what I hear... Hopefully, it's a true statement.


Years ago, I rolled over my assets from the traditional 401(k) of a former employer to the traditional TSP. I think you are right that now even moving the traditional IRA funds to the traditional TSP is possible. However, this does not help with Roth conversions.

*IF* the TSP allowed to roll over Roth IRA funds into the Roth TSP, that would solve my main issue. I'd roll 99% of my traditional TSP funds into a Vanguard traditional IRA, convert the IRA to Roth over a number of years, and when I am done, I'd roll my Roth IRA to Roth TSP. Alas, the TSP does not accept Roth funds.

But you got me thinking. If we can't convince the TSP to allow in-plan Roth conversions, can we convince them to accept Roth funds from other custodians? Perhaps, the latter would be easier from the regulatory or accounting perspectives?

Victoria
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Re: Improving the TSP [for current participants]

Postby TimeRunner » Tue Sep 01, 2015 10:23 am

VictoriaF wrote:But you got me thinking. If we can't convince the TSP to allow in-plan Roth conversions, can we convince them to accept Roth funds from other custodians? Perhaps, the latter would be easier from the regulatory and accounting perspectives?Victoria


As Rkhusky point out, TSP Roth is subject to RMAs, whereas your "outside" Roth IRA isn't. That would be a huge downside of moving a Roth into the TSP.

I've seen the idea Jerry wrote about written up elsewhere. It would be nice to know if someone has actually done that successfully.

I've only been contributing to the Roth TSP for about a year, and those holdings are just under 2% of my total TSP, so RMAs are more of an annoyance. But I'm considering switching back to TSP Traditional as I finish out my service here (retiring Dec 2016 in current plan), since it doesn't look like TSP is going to be changing anything soon.
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Re: Improving the TSP [for current participants]

Postby VictoriaF » Tue Sep 01, 2015 10:32 am

TimeRunner wrote:
VictoriaF wrote:But you got me thinking. If we can't convince the TSP to allow in-plan Roth conversions, can we convince them to accept Roth funds from other custodians? Perhaps, the latter would be easier from the regulatory and accounting perspectives?Victoria


As Rkhusky point out, TSP Roth is subject to RMAs, whereas your "outside" Roth IRA isn't. That would be a huge downside of moving a Roth into the TSP.


I don't care about RMDs, I care about taxes. The TSP is not my only custodian. I would receive non-taxable Roth RMDs from the TSP and spend them. In the mean time, my Roth IRA funds would accumulate for the rainy day or for my heir or both.

Victoria
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Re: Improving the TSP [for current participants]

Postby MichDad » Tue Sep 01, 2015 12:06 pm

Given the current TSP rules and limitations, here's how I think I'll have to deal with my TSP account upon retirement:

First, I'll convert my entire TSP account to the G Fund. That will be temporary. I haven't held any G Fund assets since the late 1980s, when that was still required.

Second, I'll transfer all but the bare minimum ($200?) of my TSP account balance into low cost Vanguard IRAs. I'll be sure to separate the regular TSP assets from the Roth TSP assets into separate traditional and Roth Vanguard IRAs.

EDIT: I received a response today (September 3, 2015) from the TSP to my question about minimum TSP balances. Here is what they wrote: "You can transfer funds from other eligible plans into your TSP account as long as your TSP account balance is greater than $0. However, please note that, if your vested account balance is less than $200 after you separate from service, the TSP will automatically cash out your account and mail a check for the entire amount to your address of record. You cannot leave this money in the TSP, and you cannot choose any other method for receiving it. The automatic cash-out process is based on a system review that occurs within 31 days of your separation from Federal service."

Third, I'll begin to convert some of my regular TSP balance (now in a Vanguard IRA per step 2 above) into my Vanguard Roth IRA. I'll do this before my wife and I begin to collect our respective Social Security benefits.

Fourth, I'll roll a portion of my traditional Vanguard IRA (that originated from the TSP) back into the TSP. I'll reallocate my TSP account into my preferred funds. This will keep my expenses on those assets to a minimum. As Victoria has correctly pointed out, current TSP rules do not permit us to roll our Roth IRAs into our Roth TSP accounts.

Of course, my strong preference would be for the FRTIB to change the rules to allow direct regular-to-Roth TSP conversions all within the TSP. Given the letter I recently received from the TSP, that doesn't appear to be on the horizon.

If anyone sees a different or better approach, I hope you'll share it. The lack of flexibility with the TSP is quite bothersome.

MichDad
Last edited by MichDad on Thu Sep 03, 2015 3:53 pm, edited 1 time in total.

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Re: Improving the TSP [for current participants]

Postby VictoriaF » Tue Sep 01, 2015 5:04 pm

MichDad wrote:Given the current TSP rules and limitations, here's how I think I'll have to deal with my TSP account upon retirement:

First, I'll convert my entire TSP account to the G Fund. That will be temporary. I haven't held any G Fund assets since the late 1980s, when that was still required.


Right now, all my TSP assets are in the G Fund. However, I recently thought of a new strategy. When the stocks are high, e.g., the recent 18k on the Dow, I'll sell stocks in a Roth IRA and simultaneously buy stocks in the traditional TSP. This would decrease taxes on conversions, because a decline in the stock market would reduce the traditional funds.

When the stocks are low, e.g., 12k on the Dow, I'll sell stocks in the traditional TSP and simultaneously buy stocks in a Roth IRA. This would position my stocks for an untaxed growth.

I am still evaluating this strategy and don't have a good answer for the days like today. TSP and my other custodians limit frequent trading and so my strategy would work only in coarse-grained increments.

MichDad wrote:Second, I'll transfer all but the bare minimum ($200?) of my TSP account balance into low cost Vanguard IRAs. I'll be sure to separate the regular TSP assets from the Roth TSP assets into separate traditional and Roth Vanguard IRAs.
...
Fourth, I'll roll a portion of my traditional Vanguard IRA (that originated from the TSP) back into the TSP.


What is the advantage of removing almost all funds from the TSP and then putting some of them back in? Is it to have the flexibility of converting to Roth in Vanguard while waiting for the TSP to allow in-plan conversions, and not exceeding the TSP limits on the number of withdrawals?

I recall there is an amount, below which the TSP sends you a check. It's better to keep about $10k in order not to trigger an account closing action.

MichDad wrote:Of course, my strong preference would be for the FRTIB to change the rules to allow direct regular-to-Roth TSP conversions all within the TSP. Given the letter I recently received from the TSP, that doesn't appear to be on the horizon.

If anyone sees a different or better approach, I hope you'll share it. The lack of flexibility with the TSP is quite bothersome.

MichDad


I wholeheartedly agree with you about the TSP shortcoming and likewise hope that the FRTIB would act in interest of responsible investors who want to stay in the TSP and are being driven out by its awkward rules.

Victoria
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Re: Improving the TSP [for current participants]

Postby grabiner » Tue Sep 01, 2015 9:32 pm

VictoriaF wrote:
MichDad wrote:Given the current TSP rules and limitations, here's how I think I'll have to deal with my TSP account upon retirement:

First, I'll convert my entire TSP account to the G Fund. That will be temporary. I haven't held any G Fund assets since the late 1980s, when that was still required.


Right now, all my TSP assets are in the G Fund. However, I recently thought of a new strategy. When the stocks are high, e.g., the recent 18k on the Dow, I'll sell stocks in a Roth IRA and simultaneously buy stocks in the traditional TSP. This would decrease taxes on conversions, because a decline in the stock market would reduce the traditional funds.


I don't like this strategy because of the risk-return trade-off. If you sell the G fund and buy bonds in your Roth IRA, you will increase the risk of your bond holdings, for no benefit because the TSP's stock funds are no better than the options in your Roth IRA.

If you tax-adjust your asset allocation, you are also not getting any benefit; selling $7100 in stock in the Roth IRA and buying $10,000 in the TSP increases neither the expected risk nor the expected return of your stock investments.

And if you don't tax-adjust, then selling $10,000 in stock in the Roth IRA and buying $10,000 in the TSP decreases the expected risk, but also the expected return, by 29% of the difference between the values for stocks and bonds.
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Re: Improving the TSP [for current participants]

Postby VictoriaF » Tue Sep 01, 2015 9:53 pm

grabiner wrote:
VictoriaF wrote:Right now, all my TSP assets are in the G Fund. However, I recently thought of a new strategy. When the stocks are high, e.g., the recent 18k on the Dow, I'll sell stocks in a Roth IRA and simultaneously buy stocks in the traditional TSP. This would decrease taxes on conversions, because a decline in the stock market would reduce the traditional funds.


I don't like this strategy because of the risk-return trade-off. If you sell the G fund and buy bonds in your Roth IRA, you will increase the risk of your bond holdings, for no benefit because the TSP's stock funds are no better than the options in your Roth IRA.

If you tax-adjust your asset allocation, you are also not getting any benefit; selling $7100 in stock in the Roth IRA and buying $10,000 in the TSP increases neither the expected risk nor the expected return of your stock investments.

And if you don't tax-adjust, then selling $10,000 in stock in the Roth IRA and buying $10,000 in the TSP decreases the expected risk, but also the expected return, by 29% of the difference between the values for stocks and bonds.


I think I can do both, tax-adjust and rebalance. Please take a look at my response to you in the other thread.

It's true that there is no G Fund equivalent at Vanguard or other IRA custodians. I'll have to choose something similarly safe with lower returns. But that's inevitable anyway, because I have to move money out of the TSP in order to be able to do Roth conversions.

Victoria
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Re: Improving the TSP [for current participants]

Postby TimeRunner » Fri Sep 04, 2015 12:08 pm

July 2015 FRTIB minutes have been published. Of most interest to me is Agenda Item #4:
"4. Withdrawal Options.
Mr. Long discussed the memo, "TSP Withdrawal Options" (attached), which recommends the Board's approval of additional flexibility to make partial withdrawals from TSP accounts, both in-service and post-separation. These recommendations address the challenge of a large percentage of recently separated participants taking full withdrawals as well as feedback from participants requesting greater flexibility. The proposed rules - specified on pages 4 and 5 of the memo - would allow for multiple partial in-service and post-separation withdrawals, where the current rules allow for only one. In response to a question from Board Member McCray, Mr. Long noted that participants currently have the ability to withdraw all of their money and take it elsewhere, so there is little downside to allowing them to withdraw part of their money more than once. He also stated that the purpose of the recommended rule changes is to improve outcomes for participants who are currently moving their money to plans with less advantageous designs because they are unable to make multiple withdrawals from their TSP accounts. · Mr. Long explained that these changes would require legislation followed by an Agency project, so this is not an immediate change. Board Members Jasien and McCray emphasized the importance of educating participants about the effect of withdrawals on their ability to accomplish retirement goals. Chairman Kennedy, Mr. Long, and Mr. Walther discussed the increased Agency workload that would result from these changes - especially given the interrelatedness between the withdrawal flexibility, mutual fund window, and investment advice - and steps the Agency will take to address this from both budget and project management perspectives.

Chairman Kennedy then entertained a motion regarding withdrawal options. The Board members made, seconded, and adopted the following motion by unanimous vote:
MOTION: That the Agency should proceed with a project to adopt the changes to the withdrawal rules proposed on pages 4 and 5 of the memo titled, "TSP Withdrawal Options," with the understanding that such changes are goals that will require legislation. "

Note that attachments listed at bottom of Agenda minutes PDF are actually links to the attachments and should open for viewing.
Meeting Minutes: http://www.frtib.gov/MeetingMinutes/2015/2015Jul.pdf
Agenda Item: http://www.frtib.gov/pdf/minutes/MM-2015Jul-Att7.pdf
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