Thrift Savings Plan expenses rising

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LinusP
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Thrift Savings Plan expenses rising

Post by LinusP » Thu Apr 11, 2019 5:48 pm

According to the latest TSP Highlights newsletter, net expenses are now 0.040-0.041%, up from 0.032-0.033% last year and 0.038% the year before. A small increase, certainly, but I hope the Federal Retirement Thrift Investment Board (FRTIB) manages to implement some of the new withdrawal options without increasing costs too much.

retiredjg
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Re: Thrift Savings Plan expenses rising

Post by retiredjg » Thu Apr 11, 2019 6:04 pm

It's unfortunate, but I'm looking forward to having flexible withdrawal options. :happy

Whakamole
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Re: Thrift Savings Plan expenses rising

Post by Whakamole » Thu Apr 11, 2019 6:08 pm

LinusP wrote:
Thu Apr 11, 2019 5:48 pm
According to the latest TSP Highlights newsletter, net expenses are now 0.040-0.041%, up from 0.032-0.033% last year and 0.038% the year before. A small increase, certainly, but I hope the Federal Retirement Thrift Investment Board (FRTIB) manages to implement some of the new withdrawal options without increasing costs too much.
It was 0.029% in 2015.

Jeff Albertson
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Re: Thrift Savings Plan expenses rising

Post by Jeff Albertson » Thu Apr 11, 2019 7:34 pm

Representatives from the TSP board explain / give excuses why expenses are increasing (NITP podcast) -
https://federalnewsnetwork.com/for-your ... e-experts/

krafty81
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Re: Thrift Savings Plan expenses rising

Post by krafty81 » Fri Apr 12, 2019 2:07 am

So expenses are up significantly from 2015. Frustrating.

cheezit
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Re: Thrift Savings Plan expenses rising

Post by cheezit » Fri Apr 12, 2019 8:32 am

One basis point is significant?

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dm200
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Re: Thrift Savings Plan expenses rising

Post by dm200 » Fri Apr 12, 2019 8:35 am

cheezit wrote:
Fri Apr 12, 2019 8:32 am
One basis point is significant?
My feelings exactly! For those eligible, this seems like a great plan - far, far superior to almost anything offered by employers in the private sector.

MnD
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Re: Thrift Savings Plan expenses rising

Post by MnD » Fri Apr 12, 2019 8:44 am

In reading the minutes of the Board over the past few years, I would opine the large bulk of addition spending has gone towards work to accommodate participation by members of the military, greatly increasing security and most recently bringing withdrawal and other customer-requested options into the 21st century versus 1986. I'm not going to be complaining over 1 basis point for that mix. Also a "complete" total international index is finally on the way and assuming .04ER when it rolls out, that's 64% lower than Vanguard admiral.

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dm200
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Re: Thrift Savings Plan expenses rising

Post by dm200 » Fri Apr 12, 2019 9:04 am

MnD wrote:
Fri Apr 12, 2019 8:44 am
In reading the minutes of the Board over the past few years, I would opine the large bulk of addition spending has gone towards work to accommodate participation by members of the military, greatly increasing security and most recently bringing withdrawal and other customer-requested options into the 21st century versus 1986. I'm not going to be complaining over 1 basis point for that mix. Also a "complete" total international index is finally on the way and assuming .04ER when it rolls out, that's 64% lower than Vanguard admiral.
In general, I believe, the more options and choices in the TSP, the greater will be the expenses. On the other hand, I suppose, if the total invested goes up, then there are some offsetting economies of scale.

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Re: Thrift Savings Plan expenses rising

Post by azanon » Fri Apr 12, 2019 9:21 am

cheezit wrote:
Fri Apr 12, 2019 8:32 am
One basis point is significant?
It's a 28% rise in costs!!! :o

Swansea
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Re: Thrift Savings Plan expenses rising

Post by Swansea » Fri Apr 12, 2019 9:45 am

Last time I checked, Schwab's index 500 fund expenses were lower than TSP. Now, unless you have a huge amount in the account, the reduction of .01% or so, makes little difference.

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zaboomafoozarg
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Re: Thrift Savings Plan expenses rising

Post by zaboomafoozarg » Fri Apr 12, 2019 9:56 am

azanon wrote:
Fri Apr 12, 2019 9:21 am
cheezit wrote:
Fri Apr 12, 2019 8:32 am
One basis point is significant?
It's a 28% rise in costs!!! :o
Instead of the fees taking .956% total over 30 years, they'd now take 1.193%.

Probably not a huge deal.

Lou354
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Re: Thrift Savings Plan expenses rising

Post by Lou354 » Fri Apr 12, 2019 10:22 am

Swansea wrote:
Fri Apr 12, 2019 9:45 am
Last time I checked, Schwab's index 500 fund expenses were lower than TSP. Now, unless you have a huge amount in the account, the reduction of .01% or so, makes little difference.
TSP expense includes fund expense plus administrative expense. Unless you account for the administrative expense of a 401k or similar employer-sponsored, defined-contribution retirement plan it’s not a fair comparison.

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dm200
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Re: Thrift Savings Plan expenses rising

Post by dm200 » Fri Apr 12, 2019 10:47 am

Lou354 wrote:
Fri Apr 12, 2019 10:22 am
Swansea wrote:
Fri Apr 12, 2019 9:45 am
Last time I checked, Schwab's index 500 fund expenses were lower than TSP. Now, unless you have a huge amount in the account, the reduction of .01% or so, makes little difference.
TSP expense includes fund expense plus administrative expense. Unless you account for the administrative expense of a 401k or similar employer-sponsored, defined-contribution retirement plan it’s not a fair comparison.
Yes -

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Earl Lemongrab
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Re: Thrift Savings Plan expenses rising

Post by Earl Lemongrab » Fri Apr 12, 2019 3:01 pm

At MegaCorp, the fees have been going down.

Here's a sample, including the closest index funds to TSP:

Bond Market Index Fund: 0.03%
S&P 500 Index Fund: 0.03%
International Index Fund: 0.09%
Russell 2000 Index Fund: 0.03%
Stable Value Fund: 0.29%

Notes:
1. While the Stable Value fund has a higher ER, the overall performance has been nearly identical to G fund.
2. Russell 2000 isn't a total match to an S&P completion fund
3. The plan has target funds, but they are active and not really comparable to the L funds.

This is a plan that offers total flexibility in withdrawals after separation, age 59-1/2 withdrawals, and after-tax contributions with either in-plan Roth rollover or rollover to Roth IRA.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: Thrift Savings Plan expenses rising

Post by azanon » Fri Apr 12, 2019 3:06 pm

zaboomafoozarg wrote:
Fri Apr 12, 2019 9:56 am
azanon wrote:
Fri Apr 12, 2019 9:21 am
cheezit wrote:
Fri Apr 12, 2019 8:32 am
One basis point is significant?
It's a 28% rise in costs!!! :o
Instead of the fees taking .956% total over 30 years, they'd now take 1.193%.

Probably not a huge deal.
I know sarcasm never fully translates in type, so to just be clear, I was joking and having fun with it. For all intents and purposes, I consider the TSP to be close enough to free to not worry about it, especially considering the benefit of the G fund.

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zaboomafoozarg
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Re: Thrift Savings Plan expenses rising

Post by zaboomafoozarg » Fri Apr 12, 2019 10:11 pm

azanon wrote:
Fri Apr 12, 2019 3:06 pm
zaboomafoozarg wrote:
Fri Apr 12, 2019 9:56 am
azanon wrote:
Fri Apr 12, 2019 9:21 am
cheezit wrote:
Fri Apr 12, 2019 8:32 am
One basis point is significant?
It's a 28% rise in costs!!! :o
Instead of the fees taking .956% total over 30 years, they'd now take 1.193%.

Probably not a huge deal.
I know sarcasm never fully translates in type, so to just be clear, I was joking and having fun with it. For all intents and purposes, I consider the TSP to be close enough to free to not worry about it, especially considering the benefit of the G fund.
Yeah I figured that :D I just wanted to do the math and see exactly how much it would end up costing percentage-wise over a few decades.

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Re: Thrift Savings Plan expenses rising

Post by Tdubs » Fri Apr 12, 2019 10:21 pm

dm200 wrote:
Fri Apr 12, 2019 8:35 am
cheezit wrote:
Fri Apr 12, 2019 8:32 am
One basis point is significant?
My feelings exactly! For those eligible, this seems like a great plan - far, far superior to almost anything offered by employers in the private sector.
FERS is a good retirement system, but the TSP portion? What is special about its equity funds? The their ERs are no different than what you can get at Fidelity, Vanguard, and a half dozen other places, and they are going in the opposite direction of everyone else.

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Re: Thrift Savings Plan expenses rising

Post by azanon » Fri Apr 12, 2019 11:18 pm

Tdubs wrote:
Fri Apr 12, 2019 10:21 pm
dm200 wrote:
Fri Apr 12, 2019 8:35 am
cheezit wrote:
Fri Apr 12, 2019 8:32 am
One basis point is significant?
My feelings exactly! For those eligible, this seems like a great plan - far, far superior to almost anything offered by employers in the private sector.
FERS is a good retirement system, but the TSP portion? What is special about its equity funds? The their ERs are no different than what you can get at Fidelity, Vanguard, and a half dozen other places, and they are going in the opposite direction of everyone else.
Nothing's special about the equity funds. It's just the G fund. You do realize that's more than enough to make the TSP special, right? If you use the L income fund in retirement, the G fund will constitute almost 2/3rds of your portfolio.

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Re: Thrift Savings Plan expenses rising

Post by Tdubs » Sat Apr 13, 2019 7:29 am

azanon wrote:
Fri Apr 12, 2019 11:18 pm
Tdubs wrote:
Fri Apr 12, 2019 10:21 pm
dm200 wrote:
Fri Apr 12, 2019 8:35 am
cheezit wrote:
Fri Apr 12, 2019 8:32 am
One basis point is significant?
My feelings exactly! For those eligible, this seems like a great plan - far, far superior to almost anything offered by employers in the private sector.
FERS is a good retirement system, but the TSP portion? What is special about its equity funds? The their ERs are no different than what you can get at Fidelity, Vanguard, and a half dozen other places, and they are going in the opposite direction of everyone else.
Nothing's special about the equity funds. It's just the G fund. You do realize that's more than enough to make the TSP special, right? If you use the L income fund in retirement, the G fund will constitute almost 2/3rds of your portfolio.
Very much so, and I have a decent holding of G fund. But this is a discussion about ERs in TSP, and they aren't special anymore. A few years ago, I was thinking that when I retire I'd leave in place everything I have in TSP. Now for the sake of simplicity, particularly for my DW, I'm considering moving everything to Vanguard except perhaps what I think should stay in G.

And I don't really understand why this is. I've never looked closely at this, but I was under the impression that Blackrock kept ERs low because new federal employees sometimes left before getting vested and the survivors divided up the spoils. Why aren't ERs moving closer to zero?

Swansea
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Re: Thrift Savings Plan expenses rising

Post by Swansea » Sat Apr 13, 2019 8:16 am

Tdubs wrote:
Sat Apr 13, 2019 7:29 am
azanon wrote:
Fri Apr 12, 2019 11:18 pm
Tdubs wrote:
Fri Apr 12, 2019 10:21 pm
dm200 wrote:
Fri Apr 12, 2019 8:35 am
cheezit wrote:
Fri Apr 12, 2019 8:32 am
One basis point is significant?
My feelings exactly! For those eligible, this seems like a great plan - far, far superior to almost anything offered by employers in the private sector.
FERS is a good retirement system, but the TSP portion? What is special about its equity funds? The their ERs are no different than what you can get at Fidelity, Vanguard, and a half dozen other places, and they are going in the opposite direction of everyone else.
Nothing's special about the equity funds. It's just the G fund. You do realize that's more than enough to make the TSP special, right? If you use the L income fund in retirement, the G fund will constitute almost 2/3rds of your portfolio.
Very much so, and I have a decent holding of G fund. But this is a discussion about ERs in TSP, and they aren't special anymore. A few years ago, I was thinking that when I retire I'd leave in place everything I have in TSP. Now for the sake of simplicity, particularly for my DW, I'm considering moving everything to Vanguard except perhaps what I think should stay in G.

And I don't really understand why this is. I've never looked closely at this, but I was under the impression that Blackrock kept ERs low because new federal employees sometimes left before getting vested and the survivors divided up the spoils. Why aren't ERs moving closer to zero?
Yes, the agency 1% contribution and its earnings are forfeited.

stan1
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Re: Thrift Savings Plan expenses rising

Post by stan1 » Sat Apr 13, 2019 8:42 am

Tdubs wrote:
Sat Apr 13, 2019 7:29 am
And I don't really understand why this is. I've never looked closely at this, but I was under the impression that Blackrock kept ERs low because new federal employees sometimes left before getting vested and the survivors divided up the spoils. Why aren't ERs moving closer to zero?
The additional costs are well known and are record keeping/administration related:
- Implementation of blended retirement system for military [should be a one time cost]
- Education of 20 something officer and enlisted personnel about the need to save for retirement in the TSP [will be recurring, expensive, and probably a fact of life. Yeah its a bit of a patriotic and social obligation for other TSP participants and I think many of us are OK paying a little for it]
- Cybersecurity updates [one time to catch up and then recurring to keep up]
- TSP Modernization Act [should be one time]

The costs of the managed accounts (what is paid to Blackrock) have always been low.

I do think TSP should adopt some strategies from commercial brokerages like promoting website usage over call centers. Take their phone number off most marketing material. Make people go find the phone number if they really need it.

JTColton
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Re: Thrift Savings Plan expenses rising

Post by JTColton » Sat Apr 13, 2019 9:30 am

Tdubs wrote:
Fri Apr 12, 2019 10:21 pm
FERS is a good retirement system, but the TSP portion? What is special about its equity funds? The their ERs are no different than what you can get at Fidelity, Vanguard, and a half dozen other places, and they are going in the opposite direction of everyone else.
TSP was always cheap and bare bones but it's being modernized and its use by those eligible will expand significantly in the future. Modernization costs money. If 1 basis point gives me more flexibility in withdrawal among other things, I'm fine with it. The TSP is the only place a fed can defer $19k of income. The low cost brokerages are great...for an IRA.

Tdubs
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Re: Thrift Savings Plan expenses rising

Post by Tdubs » Sat Apr 13, 2019 11:50 am

JTColton wrote:
Sat Apr 13, 2019 9:30 am
Tdubs wrote:
Fri Apr 12, 2019 10:21 pm
FERS is a good retirement system, but the TSP portion? What is special about its equity funds? The their ERs are no different than what you can get at Fidelity, Vanguard, and a half dozen other places, and they are going in the opposite direction of everyone else.
TSP was always cheap and bare bones but it's being modernized and its use by those eligible will expand significantly in the future. Modernization costs money. If 1 basis point gives me more flexibility in withdrawal among other things, I'm fine with it. The TSP is the only place a fed can defer $19k of income. The low cost brokerages are great...for an IRA.
Well, yes, then we agree that I should do as planned and roll the TSP (except my G fund holdings) to one of the low cost brokerage IRAs when I retire. As the TSP's costs drift higher than them, I'm looking for a reason to stay and I'm not finding one. Many of the costs mentioned here and an in earlier post as unique to TSP could easily be said of other funds. Modernization costs everyone money. Cyber security does, too, as does marketing to younger workers--that is what they all do. If TSP isn't the least expensive, what reason is there to stay?

Swansea
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Re: Thrift Savings Plan expenses rising

Post by Swansea » Sat Apr 13, 2019 1:40 pm

I rolled my TSP into Vanguard after I retired.

trueblueky
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Re: Thrift Savings Plan expenses rising

Post by trueblueky » Sat Apr 13, 2019 1:51 pm

Swansea wrote:
Sat Apr 13, 2019 1:40 pm
I rolled my TSP into Vanguard after I retired.
I rolled some of my TSP into tIRA at Schwab when I retired for ease of Roth conversions. When TSP gets its new rules and procedures in place, I may move everything back. But I couldn't wait. The window between retirement and RMDs was not going to wait.

stan1
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Re: Thrift Savings Plan expenses rising

Post by stan1 » Sat Apr 13, 2019 2:00 pm

Tdubs wrote:
Sat Apr 13, 2019 11:50 am
Well, yes, then we agree that I should do as planned and roll the TSP (except my G fund holdings) to one of the low cost brokerage IRAs when I retire. As the TSP's costs drift higher than them, I'm looking for a reason to stay and I'm not finding one. Many of the costs mentioned here and an in earlier post as unique to TSP could easily be said of other funds. Modernization costs everyone money. Cyber security does, too, as does marketing to younger workers--that is what they all do. If TSP isn't the least expensive, what reason is there to stay?
I agree, at this point for a retiree (or former military or federal employee with money in the TSP) the G Fund is about the only advantage it has over low cost ETFs and mutual funds on other platforms.

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dm200
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Re: Thrift Savings Plan expenses rising

Post by dm200 » Sat Apr 13, 2019 2:21 pm

JTColton wrote:
Sat Apr 13, 2019 9:30 am
Tdubs wrote:
Fri Apr 12, 2019 10:21 pm
FERS is a good retirement system, but the TSP portion? What is special about its equity funds? The their ERs are no different than what you can get at Fidelity, Vanguard, and a half dozen other places, and they are going in the opposite direction of everyone else.
TSP was always cheap and bare bones but it's being modernized and its use by those eligible will expand significantly in the future. Modernization costs money. If 1 basis point gives me more flexibility in withdrawal among other things, I'm fine with it. The TSP is the only place a fed can defer $19k of income. The low cost brokerages are great...for an IRA.
Yes, it does. No free lunch options here!

Yooper16
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Re: Thrift Savings Plan expenses rising

Post by Yooper16 » Sun Apr 14, 2019 8:52 am

Tdubs wrote:
Sat Apr 13, 2019 11:50 am
JTColton wrote:
Sat Apr 13, 2019 9:30 am
Tdubs wrote:
Fri Apr 12, 2019 10:21 pm
FERS is a good retirement system, but the TSP portion? What is special about its equity funds? The their ERs are no different than what you can get at Fidelity, Vanguard, and a half dozen other places, and they are going in the opposite direction of everyone else.
TSP was always cheap and bare bones but it's being modernized and its use by those eligible will expand significantly in the future. Modernization costs money. If 1 basis point gives me more flexibility in withdrawal among other things, I'm fine with it. The TSP is the only place a fed can defer $19k of income. The low cost brokerages are great...for an IRA.
Well, yes, then we agree that I should do as planned and roll the TSP (except my G fund holdings) to one of the low cost brokerage IRAs when I retire. As the TSP's costs drift higher than them, I'm looking for a reason to stay and I'm not finding one. Many of the costs mentioned here and an in earlier post as unique to TSP could easily be said of other funds. Modernization costs everyone money. Cyber security does, too, as does marketing to younger workers--that is what they all do. If TSP isn't the least expensive, what reason is there to stay?

Someday if Vanguard institutes a major staff training or complete tech upgrade that raises the ER, items that are frequently cursed about here, would you also question staying with Vanguard?

Later on Schwab, then Fidelity upgrades etc. etc. etc.

We stay with them so that our 2 major stashes of retirement money are not in the same place---- diversification to reduce risk--- a Boglehead concept.

stan1
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Re: Thrift Savings Plan expenses rising

Post by stan1 » Sun Apr 14, 2019 9:14 am

Yooper16 wrote:
Sun Apr 14, 2019 8:52 am
Someday if Vanguard institutes a major staff training or complete tech upgrade that raises the ER, items that are frequently cursed about here, would you also question staying with Vanguard?
I don't think either of those will happen. Vanguard will replace some (many?) customer service reps with AI (albeit slowly). Startup brokerages will will never hire large numbers of customer support agents (e.g. M1 Finance). Customers who want better service or a different website user interface will go somewhere else.

Vanguard has dropped additional services such as named Flagship reps and Advantage accounts. Vanguard has changed their cost accounting methodology so that some ETFs now have lower expense ratios than Admiral class mutual funds. Fidelity has loss-leader zero fee mutual funds.

A few people are already moving money from Vanguard to Fidelity because of those changes. As for Vanguard I think their ideal situation is people holding Vanguard ETFs at other brokerages. They manage money efficiently with economies of scale and someone else manages retail customers who don't come with economies of scale.

Large companies subsidize plan administration and don't want to face employee class action lawsuits over 401K plan administration (e.g. LM and Anthem). Smaller companies pass administration costs through to employees either through plan fees or high expense ratio funds. TSP is still a great plan, but its not unique like it was for the first 30 years of its existence.

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Re: Thrift Savings Plan expenses rising

Post by MnD » Sun Apr 14, 2019 9:28 am

stan1 wrote:
Sat Apr 13, 2019 2:00 pm
Tdubs wrote:
Sat Apr 13, 2019 11:50 am
Well, yes, then we agree that I should do as planned and roll the TSP (except my G fund holdings) to one of the low cost brokerage IRAs when I retire. As the TSP's costs drift higher than them, I'm looking for a reason to stay and I'm not finding one. Many of the costs mentioned here and an in earlier post as unique to TSP could easily be said of other funds. Modernization costs everyone money. Cyber security does, too, as does marketing to younger workers--that is what they all do. If TSP isn't the least expensive, what reason is there to stay?
I agree, at this point for a retiree (or former military or federal employee with money in the TSP) the G Fund is about the only advantage it has over low cost ETFs and mutual funds on other platforms.
In addition to the G fund.......
- Superior protection from creditors
- When reconstituted next year, the I fund ER will be 56% and 60% lower than comparable Vanguard and Blackrock offerings (VXUS, IXUS).
- Retirees age 55-59.5 can withdraw funds penalty-free without setting up and being bound by a 72(t) SEPP schedule for IRA distributions.

Yooper16
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Re: Thrift Savings Plan expenses rising

Post by Yooper16 » Sun Apr 14, 2019 10:08 am

stan1 wrote:
Sun Apr 14, 2019 9:14 am
Yooper16 wrote:
Sun Apr 14, 2019 8:52 am
Someday if Vanguard institutes a major staff training or complete tech upgrade that raises the ER, items that are frequently cursed about here, would you also question staying with Vanguard?
I don't think either of those will happen. Vanguard will replace some (many?) customer service reps with AI (albeit slowly). Startup brokerages will will never hire large numbers of customer support agents (e.g. M1 Finance). Customers who want better service or a different website user interface will go somewhere else.

Vanguard has dropped additional services such as named Flagship reps and Advantage accounts. Vanguard has changed their cost accounting methodology so that some ETFs now have lower expense ratios than Admiral class mutual funds. Fidelity has loss-leader zero fee mutual funds.

A few people are already moving money from Vanguard to Fidelity because of those changes. As for Vanguard I think their ideal situation is people holding Vanguard ETFs at other brokerages. They manage money efficiently with economies of scale and someone else manages retail customers who don't come with economies of scale.

Large companies subsidize plan administration and don't want to face employee class action lawsuits over 401K plan administration (e.g. LM and Anthem). Smaller companies pass administration costs through to employees either through plan fees or high expense ratio funds. TSP is still a great plan, but its not unique like it was for the first 30 years of its existence.

That was basically my point--- things will change. Vanguard may be tackling an potential ER issue increase(not saying they had one) by eliminating services, TSP is upgrading services to respond to needs. At some point everyone is going to face the-- should I stay or should I go-- question over reduction in services, increase in costs etc by a provider.


At my last employer(approx. 30 employees), the employer match was essentially wiped out by the costs of administration and underlying funds. So the little bittey increase in TSP is not a problem.

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Re: Thrift Savings Plan expenses rising

Post by dknightd » Sun Apr 14, 2019 10:12 am

LinusP wrote:
Thu Apr 11, 2019 5:48 pm
According to the latest TSP Highlights newsletter, net expenses are now 0.040-0.041%, up from 0.032-0.033% last year and 0.038% the year before. A small increase, certainly, but I hope the Federal Retirement Thrift Investment Board (FRTIB) manages to implement some of the new withdrawal options without increasing costs too much.
Still cheap. I guess if you don't like it you could look for a new job ;)

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Re: Thrift Savings Plan expenses rising

Post by hoppy08520 » Sun Apr 14, 2019 10:43 am

MnD wrote:
Sun Apr 14, 2019 9:28 am
In addition to the G fund.......
- Superior protection from creditors
This is a big one for me. While I don't anticipate creditors, and I'm not in a high-risk profession performing surgeries on people, why not play it safe when there is virtually no downside to playing it safe? I'm a former Fed and I have most of my tax-deferred assets in the TSP. Each time I leave a job, I roll over (most of) my 401(k) from the former job into my TSP. I do have some $$$ in an IRA because of the I Fund problem (which is getting solved) and because I want to have the opportunity to do Roth IRA conversions at some point if I retire early, but once the TSP relaxes the withdrawal rules, I might move more of my IRA money into the TSP, because if I do get the opportunity for Roth IRA conversions in the future, I can always withdraw the TSP money at that time and then do a conversion outside the TSP (unless the TSP eventually implements in-plan Roth conversions).
MnD wrote:
Sun Apr 14, 2019 9:28 am
- When reconstituted next year, the I fund ER will be 56% and 60% lower than comparable Vanguard and Blackrock offerings (VXUS, IXUS).
I am looking forward to this. It's ironic that for so long, one of the key pieces of TSP advice to "invest your international allocation outside the TSP" will soon do a complete reversal: keep your international allocation in the TSP because it will be the cheapest option by a not insignificant amount.

Lastly:
MnD wrote:
Sun Apr 14, 2019 9:28 am
- Retirees age 55-59.5 can withdraw funds penalty-free without setting up and being bound by a 72(t) SEPP schedule for IRA distributions.
I wasn't familiar with this trick, but when I read the fine print, it seems that this works only if you were a Fed and you retire from Federal Service when you're between 55 and 59.5:
TSP: Entering Retirement wrote:However, if you separate from service during or after the year you reach age 55 (or the year you reach age 50 if you are a public safety employee as defined by section 72(t)(10)(B)(ii) of the Internal Revenue Code), then the 10% early withdrawal penalty tax does not apply.
I was a Fed in my 20's so I think I would need to wait until age 59.5 to withdraw penalty-free, just like a normal IRA/401(k), right?

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grabiner
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Re: Thrift Savings Plan expenses rising

Post by grabiner » Sun Apr 14, 2019 11:01 am

hoppy08520 wrote:
Sun Apr 14, 2019 10:43 am
TSP: Entering Retirement wrote:However, if you separate from service during or after the year you reach age 55 (or the year you reach age 50 if you are a public safety employee as defined by section 72(t)(10)(B)(ii) of the Internal Revenue Code), then the 10% early withdrawal penalty tax does not apply.
I was a Fed in my 20's so I think I would need to wait until age 59.5 to withdraw penalty-free, just like a normal IRA/401(k), right?
If you leave federal service at 55 or later, you could withdraw penalty-free in that year. (Your Minimum Retirement Age is 57, but that is just the age at which you can retire and receive an immediate annuity and keep health insurance in retirement; it has nothing to do with the tax laws.)
Wiki David Grabiner

gtwhitegold
Posts: 398
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Re: Thrift Savings Plan expenses rising

Post by gtwhitegold » Sun Apr 14, 2019 12:36 pm

MnD wrote:
Sun Apr 14, 2019 9:28 am
stan1 wrote:
Sat Apr 13, 2019 2:00 pm
Tdubs wrote:
Sat Apr 13, 2019 11:50 am
Well, yes, then we agree that I should do as planned and roll the TSP (except my G fund holdings) to one of the low cost brokerage IRAs when I retire. As the TSP's costs drift higher than them, I'm looking for a reason to stay and I'm not finding one. Many of the costs mentioned here and an in earlier post as unique to TSP could easily be said of other funds. Modernization costs everyone money. Cyber security does, too, as does marketing to younger workers--that is what they all do. If TSP isn't the least expensive, what reason is there to stay?
I agree, at this point for a retiree (or former military or federal employee with money in the TSP) the G Fund is about the only advantage it has over low cost ETFs and mutual funds on other platforms.
In addition to the G fund.......
- Superior protection from creditors
- When reconstituted next year, the I fund ER will be 56% and 60% lower than comparable Vanguard and Blackrock offerings (VXUS, IXUS).
- Retirees age 55-59.5 can withdraw funds penalty-free without setting up and being bound by a 72(t) SEPP schedule for IRA distributions.
If you have followed the thread about upcoming changes to the I Fund, then you will see that the transition to the MSCI ACWI ex US IMI index will result in an increase in fees. The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition.

viewtopic.php?f=10&t=258735#unread

Swansea
Posts: 601
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Re: Thrift Savings Plan expenses rising

Post by Swansea » Sun Apr 14, 2019 1:19 pm

grabiner wrote:
Sun Apr 14, 2019 11:01 am
hoppy08520 wrote:
Sun Apr 14, 2019 10:43 am
TSP: Entering Retirement wrote:However, if you separate from service during or after the year you reach age 55 (or the year you reach age 50 if you are a public safety employee as defined by section 72(t)(10)(B)(ii) of the Internal Revenue Code), then the 10% early withdrawal penalty tax does not apply.
I was a Fed in my 20's so I think I would need to wait until age 59.5 to withdraw penalty-free, just like a normal IRA/401(k), right?
If you leave federal service at 55 or later, you could withdraw penalty-free in that year. (Your Minimum Retirement Age is 57, but that is just the age at which you can retire and receive an immediate annuity and keep health insurance in retirement; it has nothing to do with the tax laws.)
Yes, it is important to remember that the TSP is different than an IRA. I remember once telling one of our SES employees the limit on contributions was X. He said his CPA said it was Y. Y was the IRA limit and at that point in time there was a 1K differential.

nps
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Re: Thrift Savings Plan expenses rising

Post by nps » Sun Apr 14, 2019 2:30 pm

gtwhitegold wrote:
Sun Apr 14, 2019 12:36 pm
If you have followed the thread about upcoming changes to the I Fund, then you will see that the transition to the MSCI ACWI ex US IMI index will result in an increase in fees. The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition.

viewtopic.php?f=10&t=258735#unread
Where in the thread does it say that?

gtwhitegold
Posts: 398
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Re: Thrift Savings Plan expenses rising

Post by gtwhitegold » Sun Apr 14, 2019 2:39 pm

nps wrote:
Sun Apr 14, 2019 2:30 pm
gtwhitegold wrote:
Sun Apr 14, 2019 12:36 pm
If you have followed the thread about upcoming changes to the I Fund, then you will see that the transition to the MSCI ACWI ex US IMI index will result in an increase in fees. The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition.

viewtopic.php?f=10&t=258735#unread
Where in the thread does it say that?
The link to the the FRTIB minutes.

Tdubs
Posts: 414
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Re: Thrift Savings Plan expenses rising

Post by Tdubs » Sun Apr 14, 2019 3:39 pm

MnD wrote:
Sun Apr 14, 2019 9:28 am

- Superior protection from creditors
Even this advantage depends on the state you live in, right? From what I understand, creditor protection in MD is very good for any IRA.

MnD
Posts: 4151
Joined: Mon Jan 14, 2008 12:41 pm

Re: Thrift Savings Plan expenses rising

Post by MnD » Sun Apr 14, 2019 6:58 pm

gtwhitegold wrote:
Sun Apr 14, 2019 12:36 pm
MnD wrote:
Sun Apr 14, 2019 9:28 am
stan1 wrote:
Sat Apr 13, 2019 2:00 pm
Tdubs wrote:
Sat Apr 13, 2019 11:50 am
Well, yes, then we agree that I should do as planned and roll the TSP (except my G fund holdings) to one of the low cost brokerage IRAs when I retire. As the TSP's costs drift higher than them, I'm looking for a reason to stay and I'm not finding one. Many of the costs mentioned here and an in earlier post as unique to TSP could easily be said of other funds. Modernization costs everyone money. Cyber security does, too, as does marketing to younger workers--that is what they all do. If TSP isn't the least expensive, what reason is there to stay?
I agree, at this point for a retiree (or former military or federal employee with money in the TSP) the G Fund is about the only advantage it has over low cost ETFs and mutual funds on other platforms.
In addition to the G fund.......
- Superior protection from creditors
- When reconstituted next year, the I fund ER will be 56% and 60% lower than comparable Vanguard and Blackrock offerings (VXUS, IXUS).
- Retirees age 55-59.5 can withdraw funds penalty-free without setting up and being bound by a 72(t) SEPP schedule for IRA distributions.
If you have followed the thread about upcoming changes to the I Fund, then you will see that the transition to the MSCI ACWI ex US IMI index will result in an increase in fees. The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition.

viewtopic.php?f=10&t=258735#unread
There's absolutely nothing in the FRTIB minutes (that I read and posted links to) about an increase in fees for the I fund and certainly nothing like what you indicated that "The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition." All I see is some speculation from you about costs.

Please post the specific information about cost increases in the I fund or indicate that it was just speculation.

BobTheTerp
Posts: 5
Joined: Sat Oct 06, 2018 12:51 pm

Re: Thrift Savings Plan expenses rising

Post by BobTheTerp » Mon Apr 15, 2019 7:36 am

It may be well known here, but since I am still fairly new to reading this great site, there also is a very good forum for all things TSP if you are not aware of it: https://www.tsptalk.com/.

The forum contains a lot of data, tools and recommendations specifically for TSP investors and general market analysis for anyone with interest. Bogleheads and TSPtalk make up my daily investment reading!

Bob

User avatar
hoppy08520
Posts: 2127
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Re: Thrift Savings Plan expenses rising

Post by hoppy08520 » Mon Apr 15, 2019 7:44 am

MnD wrote:
Sun Apr 14, 2019 6:58 pm
gtwhitegold wrote:
Sun Apr 14, 2019 12:36 pm
MnD wrote:
Sun Apr 14, 2019 9:28 am

In addition to the G fund.......
- Superior protection from creditors
- When reconstituted next year, the I fund ER will be 56% and 60% lower than comparable Vanguard and Blackrock offerings (VXUS, IXUS).
- Retirees age 55-59.5 can withdraw funds penalty-free without setting up and being bound by a 72(t) SEPP schedule for IRA distributions.
If you have followed the thread about upcoming changes to the I Fund, then you will see that the transition to the MSCI ACWI ex US IMI index will result in an increase in fees. The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition.

viewtopic.php?f=10&t=258735#unread
There's absolutely nothing in the FRTIB minutes (that I read and posted links to) about an increase in fees for the I fund and certainly nothing like what you indicated that "The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition." All I see is some speculation from you about costs.

Please post the specific information about cost increases in the I fund or indicate that it was just speculation.
I think I found what gtwhitegold refers to:

Benchmark Study | Federal Retirement Thrift Investment Board | Thrift Savings Plan | October 2017

Transition costs, p. 54:
The transaction cost associated with transitioning the I Fund’s benchmark from the MSCI EAFE Index to the MSCI ACWI ex U.S. IMI is expected to be about 13 basis points or approximately $57 million on average. Depending on market activity at the time of the transition, we would expect the actual cost of transition to range between a cost of 28 bps ($122.6 million) or a gain of 2 bps ($7.6 million) about 67% of the time. We believe that these transition costs are reasonable given the overall shift from developed markets to emerging markets as well as into international small cap.
This is, of course, a one-time transition cost.

From p. 58:
Potential for Higher Custody Cost
Custody costs for the safekeeping of international assets could potentially be higher than current fees given the exposure to less developed markets. We list below the typical range for asset based custody fees by benchmark.
  • MSCI EAFE: 0.65 bps – 1.20 bps
  • MSCI ACWI ex U.S. IMI: 1.65 bps – 2.75 bps
  • MSCI Emerging Markets: 3.75bps – 7.20 bps
As for transaction fees, these fees are charged each time a security is bought or sold and are used to cover the costs associated with clearing and settlement. The actual transaction fee in any given year can vary based on trading volume. Per trade cost typically range from $20 per trade to $100 per trade based on emerging market country. The average per trade cost across the countries that make up the MSCI Emerging Market index is approximately $50. Please note custody fees vary and are highly dependent on specific client size, composition, and other circumstances.

Source: BlackRock
Looking at the above, the report suggests that the new I Fund will cost more than the old I Fund, by a range of 1.0 bps to 1.55 bps. So if the current I Fund has cost around 0.035% ER for the past few years on average (mental math), then the new I Fund, once in steady state, might be around 0.045% - 0.05% ER. Seems like a good deal to me when you consider the equivalent fund at Vanguard (VTIAX / VXUS) is 0.11% / 0.09%.

Page 65, in recommendations section:
The transition costs associated with the change in the I Fund benchmark are reasonable.
Interestingly, the report also notes that securities lending under the new I Fund would be more profitable to the TSP, which could recoup some of the added costs. Page 64:
Securities Lending:
– The ACWI ex U.S. IMI generated the highest expected yield and percentage out on loan.
– Across each of the last three calendar years, the income to the TSP is estimated to have been at least 1.5x more if the I Fund tracked the MSCI ACWI ex U.S. IMI instead of the MSCI EAFE index.
Overall, the small expected increase in expense ratio (perhaps around 0.015%) will likely be repaid with higher expected returns.

MnD
Posts: 4151
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Re: Thrift Savings Plan expenses rising

Post by MnD » Mon Apr 15, 2019 8:08 am

hoppy08520 wrote:
Mon Apr 15, 2019 7:44 am
MnD wrote:
Sun Apr 14, 2019 6:58 pm
gtwhitegold wrote:
Sun Apr 14, 2019 12:36 pm
MnD wrote:
Sun Apr 14, 2019 9:28 am

In addition to the G fund.......
- Superior protection from creditors
- When reconstituted next year, the I fund ER will be 56% and 60% lower than comparable Vanguard and Blackrock offerings (VXUS, IXUS).
- Retirees age 55-59.5 can withdraw funds penalty-free without setting up and being bound by a 72(t) SEPP schedule for IRA distributions.
If you have followed the thread about upcoming changes to the I Fund, then you will see that the transition to the MSCI ACWI ex US IMI index will result in an increase in fees. The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition.

viewtopic.php?f=10&t=258735#unread
There's absolutely nothing in the FRTIB minutes (that I read and posted links to) about an increase in fees for the I fund and certainly nothing like what you indicated that "The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition." All I see is some speculation from you about costs.

Please post the specific information about cost increases in the I fund or indicate that it was just speculation.
I think I found what gtwhitegold refers to:

Benchmark Study | Federal Retirement Thrift Investment Board | Thrift Savings Plan | October 2017

The one-time transition costs described in the report as transaction costs are not reflected in the ER per standard industry practice.
Possibly higher custodian costs would be baked into the ER, whereas fund securities lending income is expected to be higher.
Nothing in the report to suggest TSP I would approach VXUS or IXUS ER's. I wouldn't be surprised if the ER remains the same once the outcome of the competitive bidding is known. The handwriting is on the wall for ER's.

tea_pirate
Posts: 98
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Re: Thrift Savings Plan expenses rising

Post by tea_pirate » Mon Apr 15, 2019 8:23 am

BobTheTerp wrote:
Mon Apr 15, 2019 7:36 am
It may be well known here, but since I am still fairly new to reading this great site, there also is a very good forum for all things TSP if you are not aware of it: https://www.tsptalk.com/.

The forum contains a lot of data, tools and recommendations specifically for TSP investors and general market analysis for anyone with interest. Bogleheads and TSPtalk make up my daily investment reading!

Bob
Rubbish website, and nobody here even needs to click on it. The slogan of TSP Talk is "Friends don't let friends buy and hold." This is incompatible with the Bogleheads philosophy.

The only other people at work who seem to care about investing are market timers who use the "signals" from websites like TSP Talk. It's amazing how much money they lose out on compared to buy and hold. Some think they can choose the best performing fund of the year in January. Some think they can buy into the C, S, and I Funds before an upswing then retreat to the G Fund before a downturn and increase their returns. They spend every day at lunch talking about their latest strategies. I'll occasionally get caught in a water cooler chat and they'll ask me how my returns are, which I sometimes know from a quick read of my quarterly and annual statements.

All I know is my balance is multiple times larger than those who have worked here twice as long as me, and they sure spend a lot of time figuring out how to lose money. Set a reasonable allocation, max out your contribution and forget about it. You'll be better off for it.

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hoppy08520
Posts: 2127
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Re: Thrift Savings Plan expenses rising

Post by hoppy08520 » Mon Apr 15, 2019 8:45 am

tea_pirate wrote:
Mon Apr 15, 2019 8:23 am
All I know is my balance is multiple times larger than those who have worked here twice as long as me, and they sure spend a lot of time figuring out how to lose money.
:D

Thanks for the chuckle.

I get the same impression when I read the comments section, on any website, on anything about the TSP. All the geniuses talking about when to move from the stock funds (C, S, I) to G Fund to stocks, and back again.

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Psyayeayeduck
Posts: 134
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Re: Thrift Savings Plan expenses rising

Post by Psyayeayeduck » Mon Apr 15, 2019 8:48 am

Maybe it is me but that's an incredibly minor jump that I wouldn't lose sleep over it.

BobTheTerp
Posts: 5
Joined: Sat Oct 06, 2018 12:51 pm

Re: Thrift Savings Plan expenses rising

Post by BobTheTerp » Mon Apr 15, 2019 9:28 am

:sharebeer "Rubbish website, and nobody here even needs to click on it. The slogan of TSP Talk is "Friends don't let friends buy and hold." This is incompatible with the Bogleheads philosophy.

The only other people at work who seem to care about investing are market timers who use the "signals" from websites like TSP Talk. It's amazing how much money they lose out on compared to buy and hold. Some think they can choose the best performing fund of the year in January. Some think they can buy into the C, S, and I Funds before an upswing then retreat to the G Fund before a downturn and increase their returns. They spend every day at lunch talking about their latest strategies. I'll occasionally get caught in a water cooler chat and they'll ask me how my returns are, which I sometimes know from a quick read of my quarterly and annual statements.

All I know is my balance is multiple times larger than those who have worked here twice as long as me, and they sure spend a lot of time figuring out how to lose money. Set a reasonable allocation, max out your contribution and forget about it. You'll be better off for it."


Talk about getting 'Tea Bagged'! Thought I prefaced with kinda new here, but guess I should remain in receive-mode until I complete either my degree in advanced Economics or become a CFA!! Although I do think that I am smart enough to realize your 'timing the market' points because day one reading Bogleheads provides this, but TSPtalk provides discussions about topics regarding this ORIGINAL post and much more. I'll continue to read both sites. :happy

tea_pirate
Posts: 98
Joined: Mon Dec 03, 2018 7:29 am

Re: Thrift Savings Plan expenses rising

Post by tea_pirate » Mon Apr 15, 2019 9:55 am

BobTheTerp wrote:
Mon Apr 15, 2019 9:28 am
Talk about getting 'Tea Bagged'! Thought I prefaced with kinda new here, but guess I should remain in receive-mode until I complete either my degree in advanced Economics or become a CFA!! Although I do think that I am smart enough to realize your 'timing the market' points because day one reading Bogleheads provides this, but TSPtalk provides discussions about topics regarding this ORIGINAL post and much more. I'll continue to read both sites. :happy
Sorry if it came off the wrong way, that was in no way meant to be harsh on you personally, rather on TSP Talk itself to make it clear that there's no real value added there for Bogleheads. You're already on the best site for investing advice. Important news on TSP developments gets posted here and on the official tsp.gov website.

gtwhitegold
Posts: 398
Joined: Fri Sep 21, 2012 1:55 pm

Re: Thrift Savings Plan expenses rising

Post by gtwhitegold » Mon Apr 15, 2019 4:13 pm

hoppy08520 wrote:
Mon Apr 15, 2019 7:44 am
MnD wrote:
Sun Apr 14, 2019 6:58 pm
gtwhitegold wrote:
Sun Apr 14, 2019 12:36 pm
MnD wrote:
Sun Apr 14, 2019 9:28 am

In addition to the G fund.......
- Superior protection from creditors
- When reconstituted next year, the I fund ER will be 56% and 60% lower than comparable Vanguard and Blackrock offerings (VXUS, IXUS).
- Retirees age 55-59.5 can withdraw funds penalty-free without setting up and being bound by a 72(t) SEPP schedule for IRA distributions.
If you have followed the thread about upcoming changes to the I Fund, then you will see that the transition to the MSCI ACWI ex US IMI index will result in an increase in fees. The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition.

viewtopic.php?f=10&t=258735#unread
There's absolutely nothing in the FRTIB minutes (that I read and posted links to) about an increase in fees for the I fund and certainly nothing like what you indicated that "The I Fund will likely be more expensive than VXUS or IXUS for the transition period, but will be less expensive after. It will also likely be more expensive than it is now after the transition." All I see is some speculation from you about costs.

Please post the specific information about cost increases in the I fund or indicate that it was just speculation.
I think I found what gtwhitegold refers to:

Benchmark Study | Federal Retirement Thrift Investment Board | Thrift Savings Plan | October 2017

Transition costs, p. 54:
The transaction cost associated with transitioning the I Fund’s benchmark from the MSCI EAFE Index to the MSCI ACWI ex U.S. IMI is expected to be about 13 basis points or approximately $57 million on average. Depending on market activity at the time of the transition, we would expect the actual cost of transition to range between a cost of 28 bps ($122.6 million) or a gain of 2 bps ($7.6 million) about 67% of the time. We believe that these transition costs are reasonable given the overall shift from developed markets to emerging markets as well as into international small cap.
This is, of course, a one-time transition cost.

From p. 58:
Potential for Higher Custody Cost
Custody costs for the safekeeping of international assets could potentially be higher than current fees given the exposure to less developed markets. We list below the typical range for asset based custody fees by benchmark.
  • MSCI EAFE: 0.65 bps – 1.20 bps
  • MSCI ACWI ex U.S. IMI: 1.65 bps – 2.75 bps
  • MSCI Emerging Markets: 3.75bps – 7.20 bps
As for transaction fees, these fees are charged each time a security is bought or sold and are used to cover the costs associated with clearing and settlement. The actual transaction fee in any given year can vary based on trading volume. Per trade cost typically range from $20 per trade to $100 per trade based on emerging market country. The average per trade cost across the countries that make up the MSCI Emerging Market index is approximately $50. Please note custody fees vary and are highly dependent on specific client size, composition, and other circumstances.

Source: BlackRock
Looking at the above, the report suggests that the new I Fund will cost more than the old I Fund, by a range of 1.0 bps to 1.55 bps. So if the current I Fund has cost around 0.035% ER for the past few years on average (mental math), then the new I Fund, once in steady state, might be around 0.045% - 0.05% ER. Seems like a good deal to me when you consider the equivalent fund at Vanguard (VTIAX / VXUS) is 0.11% / 0.09%.

Page 65, in recommendations section:
The transition costs associated with the change in the I Fund benchmark are reasonable.
Interestingly, the report also notes that securities lending under the new I Fund would be more profitable to the TSP, which could recoup some of the added costs. Page 64:
Securities Lending:
– The ACWI ex U.S. IMI generated the highest expected yield and percentage out on loan.
– Across each of the last three calendar years, the income to the TSP is estimated to have been at least 1.5x more if the I Fund tracked the MSCI ACWI ex U.S. IMI instead of the MSCI EAFE index.
Overall, the small expected increase in expense ratio (perhaps around 0.015%) will likely be repaid with higher expected returns.
This is what I was referring to and I apologize that I extraploated greater costs increases than actually likely to occur. I guess that is what happens when you are in a hurry and just think you find the right thread that you think that you are talking about.

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