TSP Expense Ratio jumps to 0.038%

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tinscale
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Re: TSP Expense Ratio jumps to 0.038%

Post by tinscale » Sun Feb 19, 2017 10:48 am

Based on the following from the FY 2016 Federal Budget, it appears that the TSP is not taxpayer funded/subsidized:

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pyld76
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Re: TSP Expense Ratio jumps to 0.038%

Post by pyld76 » Sun Feb 19, 2017 11:44 am

mrc wrote:
You are spot on navy: That change makes TSP the same cost as Vanguard TSM institutional. So for another $50/year, we can have all funds under one roof, easy RMD and rebalancing management, and very flexible withdrawal options.

Despite the low relative cost, I wonder how folks would feel if their funds' ERs rose 30%?! Is that extra cost to fund work on a more flexible withdrawal effort?


If you are making the VG institutional minimum investments, (5 million per fund), isn't this a lot of optimizing one's tap dance on a the head of a pin? Or, even at a thousand dollar a year drag to the old TSP ERs, what's kept you? Surely at that portfolio size the stuff you mention on RMD and rebalancing alone costs you more than that, if not in a fair valuation of your own time.

Or, and i mean this with sincere respect: the TSP is still the greatest 401k-style plan in existence for the overwhelming majority of its participants (possessing institutional class costs at 4bp and the G fund). Your situation is in the realm of the sharpest of the corner cases.

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mrc
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Re: TSP Expense Ratio jumps to 0.038%

Post by mrc » Sun Feb 19, 2017 1:00 pm

No offense taken. I hope I didn't offend others as well. I wasn't complaining about the absolute ERs of the TSP. I have access to institution funds through a 403b from a former (very large university) employer. I'm not moving $5M chunks around to save fractional basis points.

I still believe people would take notice if all their retirement funds' ERs jumped by 1/3 overnight, if the ERs seem likely rise again in subsequent years, and the ERs were trending upward when other funds are lowering ERs. Although very low to begin with, a 1/3 rise has significance when compared to other (institutional class) ERs.

My state taxes don't favor TSP withdrawals. Back to original point: Given the TSP's awful withdrawal options, withdrawing all or most of those funds at retirement is an easier decision given the current TSP's ER.
A great challenge of life: Knowing enough to think you're doing it right, but not enough to know you're doing it wrong. — Neil deGrasse Tyson

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dm200
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Re: TSP Expense Ratio jumps to 0.038%

Post by dm200 » Sun Feb 19, 2017 2:19 pm

chuckb84 wrote:
dm200 wrote:
chuckb84 wrote:
dm200 wrote:I am not (nor have ever been) a TSP participant. I am a taxpayer and participant in various retirement programs.
I see NO reason that the employer (federal government, taxpayers) should further subsidize the TSP.

It's part of the full compensation package to Federal employees. There's no "subsidy" unless you also regard the salaries of Feds as "subsidy". Deferred compensation is more like it.

You misinterpreted my post. I did not criticize the current arrangement of the TSP and federal employees. I was only expressing an opinion that there should not be a "further" subsidy.

In fact there are no "subsidies". Straight from the TSP web page
"Expenses are offset by the forfeitures of Agency Automatic (1%) Contributions of FERS employees who leave Federal service before they are vested, other forfeitures, and loan fees. Because these amounts are not sufficient to cover all of the TSP's expenses, TSP participants share in the remainder of the costs."
If there is anything that could be called a "subsidy" it is the 5% match that the Federal government provides as part of a compensation package, just as many private companies do. The 0.038% is utterly inconsequential. And, as noted above, that's paid by the TSP and its participants.


My question (do not know answer) is a comparison of how the payroll administration cost, promotional and educational costs, etc. between the TSP and a "typical" private sector 401k plan. For example, there are enrollment forms, web site access, enrollment information documents, for any kind of 401k, 403b, TSP, etc. Are any of these costs paid by the Federal employer, where the participants in the private sector pay such fees? My guess is that, in the private sector, when the employer engages a third party to completely administer the 401k plan, such expenses are included in the 401k costs that may pass to the participants. What about the TSP?

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dm200
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Re: TSP Expense Ratio jumps to 0.038%

Post by dm200 » Sun Feb 19, 2017 2:29 pm

That change makes TSP the same cost as Vanguard TSM institutional. So for another $50/year, we can have all funds under one roof, easy RMD and rebalancing management, and very flexible withdrawal options.


I do not think so. The Vanguard Institutional fund can have such a low expense ratio because it requires very large balance and does not have/offer all of the administrative costs of tracking, reporting, distributing funds from and to millions of participants.

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Re: TSP Expense Ratio jumps to 0.038%

Post by mrc » Sun Feb 19, 2017 2:34 pm

dm200 wrote:
That change makes TSP the same cost as Vanguard TSM institutional for me, in my TIAA 403b. So for another $50/year, we can have all funds under one roof, easy RMD and rebalancing management, and very flexible withdrawal options.


I do not think so. The Vanguard Institutional fund can have such a low expense ratio because it requires very large balance and does not have/offer all of the administrative costs of tracking, reporting, distributing funds from and to millions of participants.


This is a sharp crowd... added a little clarification of my thoughts to the original message text, highlighted above.
A great challenge of life: Knowing enough to think you're doing it right, but not enough to know you're doing it wrong. — Neil deGrasse Tyson

nps
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Re: TSP Expense Ratio jumps to 0.038%

Post by nps » Sun Feb 19, 2017 3:21 pm

dm200 wrote:My question (do not know answer) is a comparison of how the payroll administration cost, promotional and educational costs, etc. between the TSP and a "typical" private sector 401k plan. For example, there are enrollment forms, web site access, enrollment information documents, for any kind of 401k, 403b, TSP, etc. Are any of these costs paid by the Federal employer, where the participants in the private sector pay such fees? My guess is that, in the private sector, when the employer engages a third party to completely administer the 401k plan, such expenses are included in the 401k costs that may pass to the participants. What about the TSP?


https://www.tsp.gov/PlanParticipation/B ... enses.html

TSP expenses (i.e., the cost of administering the program) include the costs of operating and maintaining the TSP’s recordkeeping system, providing participant services, and the printing and mailing of notices, statements, and publications.

These expenses are paid from the forfeitures of Agency Automatic (1%) Contributions of certain Federal employees who leave Federal service before they are vested, other forfeitures, loan fees, and — because those forfeitures are not sufficient to cover all of the TSP’s expenses — earnings on participants’ accounts.

pyld76
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Re: TSP Expense Ratio jumps to 0.038%

Post by pyld76 » Sun Feb 19, 2017 8:04 pm

mrc wrote:No offense taken. I hope I didn't offend others as well. I wasn't complaining about the absolute ERs of the TSP. I have access to institution funds through a 403b from a former (very large university) employer. I'm not moving $5M chunks around to save fractional basis points.

I still believe people would take notice if all their retirement funds' ERs jumped by 1/3 overnight, if the ERs seem likely rise again in subsequent years, and the ERs were trending upward when other funds are lowering ERs. Although very low to begin with, a 1/3 rise has significance when compared to other (institutional class) ERs.

My state taxes don't favor TSP withdrawals. Back to original point: Given the TSP's awful withdrawal options, withdrawing all or most of those funds at retirement is an easier decision given the current TSP's ER.


Got it. While I share the thought about an absolute %30 increase in ER, I believe a single basis point going 3 to 4 is a relatively small problem to have compared to many/most in the 401k/403b space. I'd make that trade in a heartbeat to get the G fund for my bind allocation alone.

In that light, if you have access to similar ERs and are in the withdrawal phase, it might make sense.

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Re: TSP Expense Ratio jumps to 0.038%

Post by BigMoneyNoWhammies » Tue Jul 11, 2017 12:33 pm

MnD wrote:
mrc wrote:The ER has been 0.29%. Though it's still lower than anything else we have. This will make the decision to get completely out of TSP when DW retires (because of the limited withdrawal options) into Vanguard institutional that much easier.
Until Vanguard comes out with a government bond fund with a duration of 1 day and a yield that's indexed to blended intermediate term Treasury yields, I don't see how getting "completely out" of TSP to Vanguard or any other brokerage will be an easy decision.
100% agree with the above. There is no other fund in the world of which I am aware that offers essentially guaranteed return with 0% chance of loss and absurdly low ER in the manner that the G Fund does. As a federal employee only a few years into my career I don't currently utilize the G fund in my portfolio, but anyone who does have access to TSP should think long and hard before leaving altogether. The G fund is a great place to park your money once you hit retirement age and don't have a tolerance for market risk or during a serious market downturn, and upon hitting retirement a few decades from now I plan to do exactly that. Also keep in mind that once you leave TSP, there is no getting back in should you change your mind.

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Re: TSP Expense Ratio jumps to 0.038%

Post by Fryxell » Tue Jul 11, 2017 11:21 pm

Svensk Anga wrote:This suggests to me that the lowest cost versions of total market funds from Vanguard, Schwab, Fido, etc and ETF's are getting to the lower limit on cost to run a fund. There are no more economies of scale to be harvested. Maybe securities lending could shave a basis point or two.

Collective investment trusts (available only in employer plans) as an alternative to mutual funds may shave a basis point via lower administrative burden.
The Vanguard 500 Institutional Select (VFFSX) has a 0.01% expense ratio. And Vanguard isn't as aggressive as DFA with securities lending. So it is theoretically possible for an index fund to have a negative expense ratio. Vanguard is almost there.

I'm guessing the TSP isn't as aggressive with securities lending, or perhaps doesn't even do it at all.

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Re: TSP Expense Ratio jumps to 0.038%

Post by gtwhitegold » Wed Jul 12, 2017 5:29 am

Blackrock manages all of the TSP funds and performs similar security lending on the TSP as they do their own funds. However, this does not subtract from the costs of the funds.

The TSP funds have outperformed their indices several years due in part to securities lending.
Fryxell wrote:
Svensk Anga wrote:This suggests to me that the lowest cost versions of total market funds from Vanguard, Schwab, Fido, etc and ETF's are getting to the lower limit on cost to run a fund. There are no more economies of scale to be harvested. Maybe securities lending could shave a basis point or two.

Collective investment trusts (available only in employer plans) as an alternative to mutual funds may shave a basis point via lower administrative burden.
The Vanguard 500 Institutional Select (VFFSX) has a 0.01% expense ratio. And Vanguard isn't as aggressive as DFA with securities lending. So it is theoretically possible for an index fund to have a negative expense ratio. Vanguard is almost there.

I'm guessing the TSP isn't as aggressive with securities lending, or perhaps doesn't even do it at all.

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Re: TSP Expense Ratio jumps to 0.038%

Post by azanon » Wed Jul 12, 2017 7:52 am

BigMoneyNoWhammies wrote:As a federal employee only a few years into my career I don't currently utilize the G fund in my portfolio, but anyone who does have access to TSP should think long and hard before leaving altogether.
I'd say there are a number of other things to consider when deciding whether to keep it there or not, other than how great the G fund. Just to throw one out there, did you guys know that if you're married, your spouse is entitled by law to a prescribed survivor annuity if you make a full withdrawal with a balance over $3500 (This is the joint life annuity with a 50% survivor benefit, level payments,and no cash refund feature)? Chances are, whatever retirement plan you'd roll the TSP into, doesn't have such restrictions and protections for someone other than you who earned this money. So it might be a form of risk-management to do the rollover (which does require spousal consent) while you're (still?) on amicable terms. :wink:

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Re: TSP Expense Ratio jumps to 0.038%

Post by Maverick3320 » Wed Jul 12, 2017 8:12 am

MnD wrote:
dm200 wrote:Do any of you wonder about the widespread anger at federal government employees? It is nearly beyond my comprehension that such folks complain about the TSP - when the costs (expense ratio) is so incredibly low and federal employees still have a defined benefit pension plan as well.
Is there widespread anger directed at other large employers that offer only bloated expense ratio fund options and froze or eliminated defined benefit pension plans? Or is anger just directed at the ever-shrinking pool of others who haven't yet been hung out to dry (yet) their employers?

The 401-K only (and only for those with employers that offer one) for our retirement system has been a massive failure for the masses by any objective measure. In 2010 the median retirement savings balance in the US for households is $3,000 and $12,000 for those age 55-64.

http://www.nirsonline.org/index.php?opt ... iew&id=768
I'm not sure that looking at the total amount saved in an account is the best way to judge the success of a program. The US government could subsidize the best retirement program in history and I doubt it would move the needle much on savings rate for 75% of the population. Some people don't have the money, and a lot of people just don't care about saving for retirement.

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Re: TSP Expense Ratio jumps to 0.038%

Post by Maverick3320 » Wed Jul 12, 2017 8:17 am

dm200 wrote:
daveydoo wrote:
dm200 wrote: Do any of you wonder about the widespread anger at federal government employees? It is nearly beyond my comprehension that such folks complain about the TSP
Is this a thing? Do you have any citations? Or is this just personal experience? I wasn't aware that there was widespread anger directed against federal employees. This would be financially actionable for many of my clients.
1. I am not saying such anger is justifiable.

2. Have you noticed who is President and why?

Any more and this will be locked.
People are angry at the government because of low TSP expense ratios? And this anger is related to Trump? This is getting a bit ridiculous, don't you think?

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Re: TSP Expense Ratio jumps to 0.038%

Post by amateurnovice » Wed Jul 12, 2017 8:31 am

dm200 wrote:I am not (nor have ever been) a TSP participant. I am a taxpayer and participant in various retirement programs.

I see NO reason that the employer (federal gevernment, taxpayers) should further subsidize the TSP.

sweet take :|

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Re: TSP Expense Ratio jumps to 0.038%

Post by azanon » Wed Jul 12, 2017 9:05 am

amateurnovice wrote:
dm200 wrote:I am not (nor have ever been) a TSP participant. I am a taxpayer and participant in various retirement programs.

I see NO reason that the employer (federal gevernment, taxpayers) should further subsidize the TSP.

sweet take :|
If you see no reason to pay for any employer benefits for federal employees despite the fact that so many other, competitive potential employers provide benefits, then I'd probably see no reason to continue to be a federal employee.

While I get the desire to get and attract great employees at below or no benefit cost vs. the private employment competition which, for higher level positions generally do provide benefits, I don't see how you think that'd actually work.

We lose people all the time to private companies, even with the existing benefits.

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Re: TSP Expense Ratio jumps to 0.038%

Post by Engineer250 » Wed Jul 12, 2017 9:49 am

azanon wrote:
amateurnovice wrote:
dm200 wrote:I am not (nor have ever been) a TSP participant. I am a taxpayer and participant in various retirement programs.

I see NO reason that the employer (federal gevernment, taxpayers) should further subsidize the TSP.

sweet take :|
If you see no reason to pay for any employer benefits for federal employees despite the fact that so many other, competitive potential employers provide benefits, then I'd probably see no reason to continue to be a federal employee.

While I get the desire to get and attract great employees at below or no benefit cost vs. the private employment competition which, for higher level positions generally do provide benefits, I don't see how you think that'd actually work.

We lose people all the time to private companies, even with the existing benefits.
Can't agree with you more. I am boomeranging back to the private sector for what will be good benefits in the private sector but not as good as what I have now. It's still worth the tradeoff for me (not a financial decision, though my future income will certainly be significantly higher). If the feds can't retain qualified professionals either quality of service will go down (inadequate support for our military, lower quality of care at the VA, harder for Grandma to work with social security) or costs will have to go up. I suspect the former will happen, people will continue to complain about how terrible federal employees are, who continue to try to do more with less. It will just be a vicious cycle and result in more cuts and a downward spiral in quality. Since apparently there are people out there who don't realize federal employees PAY TAXES let's not mention the G Fund because I think the outrage over us getting a "fund that doesn't lose value" will probably have people marching in the street. Nevermind all the folks on here with access to stable value funds that pay out more.

In TSP news, there is a bipartisan bill to expand withdrawal options (more than the basically 2 allowed now) as well as a news article I read yesterday stated the international fund will include emerging markets starting in 2019. I plan to keep my money in in the hope that they expand withdrawals sometime in the next 30 years. The addition of emerging markets is fantastic but was never a dealbreaker for me. If they get rid of the G Fund, however, I will be yanking my money out as the lower expense ratios are not enough in and of themselves for me to be keeping track of multiple 401ks.
Where the tides of fortune take us, no man can know.

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Re: TSP Expense Ratio jumps to 0.038%

Post by azanon » Wed Jul 12, 2017 10:33 am

Engineer250 wrote: If they get rid of the G Fund, however, I will be yanking my money out as the lower expense ratios are not enough in and of themselves for me to be keeping track of multiple 401ks.
Oh yeah, I'd say the expense ratios now vs. competition is hardly a strong point of TSP anymore, rather just not a detractor because they are low cost. Last time I looked, Total US stock at Vanguard could be had for 4 basis points (bp) (so actually slightly cheaper than TSP C+S), and Total International (which includes the typically more costly emerging markets) is only 11 bp. When you're down that low, it's being penny-wise, pound-foolish to quibble over just a few bp.

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Re: TSP Expense Ratio jumps to 0.038%

Post by chuckb84 » Wed Jul 12, 2017 9:08 pm

Maverick3320 wrote:
dm200 wrote:
daveydoo wrote:
dm200 wrote: Do any of you wonder about the widespread anger at federal government employees? It is nearly beyond my comprehension that such folks complain about the TSP
Is this a thing? Do you have any citations? Or is this just personal experience? I wasn't aware that there was widespread anger directed against federal employees. This would be financially actionable for many of my clients.
1. I am not saying such anger is justifiable.

2. Have you noticed who is President and why?

Any more and this will be locked.
People are angry at the government because of low TSP expense ratios? And this anger is related to Trump? This is getting a bit ridiculous, don't you think?

Yes.

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Re: TSP Expense Ratio jumps to 0.038%

Post by chuckb84 » Wed Jul 12, 2017 9:09 pm

amateurnovice wrote:
dm200 wrote:I am not (nor have ever been) a TSP participant. I am a taxpayer and participant in various retirement programs.

I see NO reason that the employer (federal gevernment, taxpayers) should further subsidize the TSP.

sweet take :|

One more time: There is no current "subsidy". The TSP web page documents quite clearly how costs are paid.

chuckb84
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Re: TSP Expense Ratio jumps to 0.038%

Post by chuckb84 » Wed Jul 12, 2017 9:14 pm

chuckb84 wrote:
amateurnovice wrote:
dm200 wrote:I am not (nor have ever been) a TSP participant. I am a taxpayer and participant in various retirement programs.

I see NO reason that the employer (federal gevernment, taxpayers) should further subsidize the TSP.

sweet take :|

One more time: There is no current "subsidy". The TSP web page documents quite clearly how costs are paid.
Just one more thing about this. At this moment, the .gov continues to be funded by "extraordinary means", which means that the .gov is effectively "borrowing" money from the G fund. Feds, current and former, don't get paid for this extra risk, which they did not consent to and over which they have no choice. So, when we discuss "subsidies" of the TSP, we should also point out how that savings of Federal employees are actually what is keeping the .gov open at this moment.

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Re: TSP Expense Ratio jumps to 0.038%

Post by Nate79 » Thu Jul 13, 2017 12:25 am

chuckb84 wrote:
chuckb84 wrote:
amateurnovice wrote:
dm200 wrote:I am not (nor have ever been) a TSP participant. I am a taxpayer and participant in various retirement programs.

I see NO reason that the employer (federal gevernment, taxpayers) should further subsidize the TSP.

sweet take :|

One more time: There is no current "subsidy". The TSP web page documents quite clearly how costs are paid.
Just one more thing about this. At this moment, the .gov continues to be funded by "extraordinary means", which means that the .gov is effectively "borrowing" money from the G fund. Feds, current and former, don't get paid for this extra risk, which they did not consent to and over which they have no choice. So, when we discuss "subsidies" of the TSP, we should also point out how that savings of Federal employees are actually what is keeping the .gov open at this moment.
What risk? There is no risk in this action except complete failure of the US govt.

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Re: TSP Expense Ratio jumps to 0.038%

Post by prudent » Thu Jul 13, 2017 9:00 am

Topic is locked (topic derailed).

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