Improving the TSP [for current participants]

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VictoriaF
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Re: TSP Modernization Act Signed Into Law

Post by VictoriaF » Wed Nov 22, 2017 1:42 pm

MichDad wrote:
Wed Nov 22, 2017 3:37 am
VictoriaF wrote:
Tue Nov 21, 2017 7:27 pm
djmbob wrote:
Fri Nov 17, 2017 9:47 pm
Next we we need to be able to make conversions from Traditional TSP to Roth TSP.
Do you know if regular 401(k) plans allow in-plan Roth conversions?

Victoria
My wife has two separate 401(k) plans with two different employers. One plan is administered by Fidelity and the other by Schwab. In both instances, she's permitted to make in-plan conversions from her regular 401(k) account to her Roth 401(k) account. Of course, we have to pay the taxes arising from those conversions. Also, unlike the TSP, she's permitted to hold her regular and Roth 401(k) assets in different funds or other investment vehicles and, obviously, in different proportions.

I hope this helps.

MichDad
It's good to know that there are legal provisions for and precedents of in-plan conversions. Now, all I want is for the TSP to implement something similar. I would like pay taxes on in-plan conversions within TSP, keep my G fund, and stop bothering with the CD rates. I hope this will become possible before it's too late, i.e., before I move all my money out of the TSP and close the account.

Victoria
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Re: TSP Modernization Act Signed Into Law

Post by MichDad » Thu Nov 23, 2017 1:43 am

VictoriaF wrote:
Wed Nov 22, 2017 1:42 pm

It's good to know that there are legal provisions for and precedents of in-plan conversions. Now, all I want is for the TSP to implement something similar. I would like pay taxes on in-plan conversions within TSP, keep my G fund, and stop bothering with the CD rates. I hope this will become possible before it's too late, i.e., before I move all my money out of the TSP and close the account.

Victoria
I agree with you completely. If you haven't done so already, I encourage you to write to the five members of the Federal Retirement Thrift Investment Board to let them know how you feel. I've written to them by snail mail twice now. They've passed my letters on to FRTIB staff to respond months later. The responses have been vague and non-committal. If more TSP participants would write, I believe they'd listen and take action.

What I want to see are:

1. Allowance for in-plan Roth conversions;
2. The ability to hold Roth TSP assets in different funds and in different proportions than regular TSP funds; and
3. The ability to withdraw regular TSP assets separately and in different proportions than Roth TSP funds.

I don't believe this is a big ask. I don't know whether it requires legislative changes. I've asked that question too but haven't yet received an answer.

MichDad

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Re: Improving the TSP [for current participants]

Post by MichDad » Thu Nov 23, 2017 5:35 am

In light of the passage of the TSP Modernization Act, here is what I view as the three most serious remaining flaws in the TSP versus most large 401(k) plans. Numbers 2 and 3 below are obviously related.

1. The inability to make in-plan Roth conversions within the TSP;
2. The inability to hold Roth TSP assets in different funds and in different proportions than regular TSP funds; and
3. The inability to withdraw regular TSP assets separately and in different proportions than Roth TSP funds.

Like many on this board, I intend to hold my Roth assets for a longer period them than my other assets so I'd like to skew them more heavily towards equities.

I've written to the Federal Retirement Thrift Investment Board by snail mail twice now on these and other topics. They've passed my letters on to FRTIB staff to respond months later. The responses have been vague and non-committal. If more TSP participants would write, I believe they'd listen and take action.

I don't believe this is a big ask. I don't know whether it requires legislative changes. I've asked that question too but haven't yet received an answer.

MichDad

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hoppy08520
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Re: Improving the TSP [for current participants]

Post by hoppy08520 » Thu Nov 23, 2017 7:54 am

MichDad wrote:
Thu Nov 23, 2017 5:35 am
2. The inability to hold Roth TSP assets in different funds and in different proportions than regular TSP funds; and
3. The inability to withdraw regular TSP assets separately and in different proportions than Roth TSP funds.

Like many on this board, I intend to hold my Roth assets for a longer period them than my other assets so I'd like to skew them more heavily towards equities.
MichDad, until (if?) that happens, now that you can make more than one partial withdrawal from the TSP in your lifetime, could you withdraw from your TSP all but a token amount ($1,000?) into traditional and Roth IRAs, then transfer back in as much traditional funds as you can from your traditional IRA, leaving the Roth IRA funds in place outside the TSP? This way you can tilt your Roth IRA funds toward equities and your traditional TSP funds to the G Fund. If you want to do Roth conversions, leave enough in your traditional IRA for that, or simply do more partial withdrawals out of the TSP for that purpose.

While these steps are not ideal, maybe this could work until the TSP catches up.

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Re: Improving the TSP [for current participants]

Post by MichDad » Thu Nov 23, 2017 9:40 am

hoppy08520 wrote:
Thu Nov 23, 2017 7:54 am
MichDad, until (if?) that happens, now that you can make more than one partial withdrawal from the TSP in your lifetime, could you withdraw from your TSP all but a token amount ($1,000?) into traditional and Roth IRAs, then transfer back in as much traditional funds as you can from your traditional IRA, leaving the Roth IRA funds in place outside the TSP? This way you can tilt your Roth IRA funds toward equities and your traditional TSP funds to the G Fund. If you want to do Roth conversions, leave enough in your traditional IRA for that, or simply do more partial withdrawals out of the TSP for that purpose.

While these steps are not ideal, maybe this could work until the TSP catches up.
The short answer is, "yes." Sure, we can do that . . . but should we need to? We'll be unable to reap the benefits of the TSP's low expense ratio for our Roth TSP assets when they're now sitting at another company. Further, TSP assets, like 401(k) assets, have stronger legal protections against creditors than do IRAs.

Between the time I retire next year (at age 62) and when I turn 70.5, I want to convert hundreds of thousands of dollars from my regular TSP assets to Roth assets. I'll be dealing with the sort of work-around you've outlined.

MichDad

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Earl Lemongrab
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Re: Improving the TSP [for current participants]

Post by Earl Lemongrab » Thu Nov 23, 2017 11:31 am

MichDad wrote:
Thu Nov 23, 2017 5:35 am
2. The inability to hold Roth TSP assets in different funds and in different proportions than regular TSP funds; and
I think you mean inability to invest Roth and traditional contributions differently at the same time. I don't think a lot of other plans offer that, I know the Megacorp 401(k) does not. While "under the hood" the subaccounts have their separate allocation depending on what the investment choice was when they were made, from the user perspective it's all one account. There is no separate management of subaccounts.
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Re: Improving the TSP [for current participants]

Post by LadyGeek » Thu Nov 23, 2017 11:44 am

I merged VictoriaF's post (Page 4) and subsequent discussion regarding in-plan Roth conversions into here.
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Re: Improving the TSP [for current participants]

Post by Nestegg_User » Thu Nov 23, 2017 3:27 pm

MichDad wrote:
Thu Nov 23, 2017 9:40 am
The short answer is, "yes." Sure, we can do that . . . but should we need to? We'll be unable to reap the benefits of the TSP's low expense ratio for our Roth TSP assets when they're now sitting at another company. Further, TSP assets, like 401(k) assets, have stronger legal protections against creditors than do IRAs.


MichDad
MichDad

TSP withdrawals can also have state tax qualifications : in my current state, part of my TSP withdrawal is exempt from state tax, just as is part of my pension, while if it’s transferred into an IRA it loses the exemption.

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Blues
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Re: Improving the TSP [for current participants]

Post by Blues » Thu Nov 23, 2017 3:36 pm

Nearing_Destination wrote:
Thu Nov 23, 2017 3:27 pm
TSP withdrawals can also have state tax qualifications : in my current state, part of my TSP withdrawal is exempt from state tax, just as is part of my pension, while if it’s transferred into an IRA it loses the exemption.
Exactly right...which is precisely the reason I moved money into the TSP from tIRAs when I moved to my current state. The reverse process would result in the loss of the fully exempt status in my case. As a result, any withdrawals I make from the TSP will be subject to federal tax only. (Pension is fully excluded as well under the same ruling.)
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Re: Improving the TSP [for current participants]

Post by MichDad » Fri Nov 24, 2017 1:27 am

Nearing Destination and Blues,

You and others like you should be particularly interested in seeing the FRTIB move on these issues.

Earl, both my wife's two 401(k) plans allow her to invest her Roth and regular contributions differently at the same time. I'd like to do the same with my TSP account.

MichDad

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Blues
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Re: Improving the TSP [for current participants]

Post by Blues » Fri Nov 24, 2017 8:45 am

MichDad wrote:
Fri Nov 24, 2017 1:27 am
Nearing Destination and Blues,

You and others like you should be particularly interested in seeing the FRTIB move on these issues.

MichDad
I'm not sure what you're getting at specifically or what the FRTIB can do in this regard. In my particular case, the matter was settled via a state supreme court ruling:

https://www.freetaxusa.com/help/display ... faq_id=827

I don't know how the FRTIB can control how the state decides to tax such proceeds.

Since I will only be taxed on the federal side once I begin taking RMD's several years down the road, I have no desire to move any of the TSP funds elsewhere and probably wouldn't even if the state changed course on the earlier decision and allowed the funds to be exempt from state taxation. (That might change, however, if the "G" fund were to be altered substantially or eliminated.)
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MnD
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Re: Improving the TSP [for current participants]

Post by MnD » Tue Dec 19, 2017 7:23 pm

Latest TSP fact sheet on the TSP Modernization Act indicates they are going to add ability to specify split of Roth versus traditional on withdrawals. https://www.tsp.gov/PDF/formspubs/tspfs10.pdf
Question 2:


If the law has been passed, why are the
new options not yet available, and why
could it take up to two years for them to
become available?


It might seem like a simple thing to start allowing
something that’s currently not allowed, but there’s a lot
to be done to make these changes happen.
There are substantial programming changes and
form revisions to be made just to make it possible for
participants to take advantage of the new options. And
there are many publications and web pages that will
need to be changed to reflect our new policy and new
procedures. By the way, in addition to the changes made
by the new law, we’re also adding the ability to specify
how much of your withdrawal should be Roth and how
much should be traditional; withdrawals currently come
out pro rata from both sources.

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Re: Improving the TSP [for current participants]

Post by hoppy08520 » Tue Dec 19, 2017 8:04 pm

MnD wrote:
Tue Dec 19, 2017 7:23 pm
Latest TSP fact sheet on the TSP Modernization Act indicates they are going to add ability to specify split of Roth versus traditional on withdrawals. https://www.tsp.gov/PDF/formspubs/tspfs10.pdf
That's good.

Next, they just need to let you have different fund allocations for Roth and Traditional, e.g. maybe in Traditional you have 100% G Fund and in Roth you have a mix of the stock funds (C, S, I).

I believe the current way is that your fund allocations are identical in both your Roth and Traditional accounts, so you couldn't do the split illustrated in the previous sentence.

I would say, though, that being able to specify a withdrawal split is more important that allocation splits.

Also, I am not sure if this is a TSP rule or a broader rule for all employer plans - I don't have a Roth TSP or Roth 401(k), so I'm not sure if you are able to have different asset allocations for the different accounts or not. I googled this once and couldn't come up with anything because the search terms are so generic.

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Re: Improving the TSP [for current participants]

Post by Ketawa » Tue Dec 19, 2017 8:14 pm

Currently, asset allocations have to be equal across the Roth and Traditional accounts.

This doesn't bother me too much since I use tax-adjusted asset allocation, and don't think that risky assets magically give me better risk-adjusted returns in Roth accounts, a common error on the board. :wink:

There are secondary reasons I'd want to put equities in Roth due to the progressive structure of the tax code, so this would be a nice option to have.

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Re: Improving the TSP [for current participants]

Post by ABQ4804 » Tue Dec 19, 2017 8:37 pm

MnD wrote:
Tue Dec 19, 2017 7:23 pm
By the way, in addition to the changes made
by the new law, we’re also adding the ability to specify
how much of your withdrawal should be Roth and how
much should be traditional; withdrawals currently come
out pro rata from both sources.
Thanks for posting this additional text - this is great news! Nice to see a change that makes sense.

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Re: Improving the TSP [for current participants]

Post by MichDad » Wed Dec 20, 2017 1:49 am

I recently received an email from Kim Weaver, Director of External Affairs at the Federal Retirement Thrift Investment Board, with the following text:

"The TSP does not require a legislative change to allow different withdrawals from traditional TSP vs. the Roth TSP. A legislative change is not needed for a Roth in-plan conversation [sic], either. The team working on implementing the withdrawal options bill will be reviewing the feasibility of including changes to the rules governing withdrawals from traditional vs. Roth balances. A timeline for the withdrawals project is not yet available. At this time, we do not plan to make any changes to allow Roth in-plan conversion."

MichDad

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Re: Improving the TSP [for current participants]

Post by ABQ4804 » Wed Dec 20, 2017 2:21 am

Haha - “a Roth in-Plan conversation” - what a pun! Yes, a conversation about this is exactly what we need. Thanks for sharing verbatim, MichDad.

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Re: Improving the TSP [for current participants]

Post by Engineer250 » Wed Dec 20, 2017 11:49 am

MichDad wrote:
Wed Dec 20, 2017 1:49 am
I recently received an email from Kim Weaver, Director of External Affairs at the Federal Retirement Thrift Investment Board, with the following text:

"The TSP does not require a legislative change to allow different withdrawals from traditional TSP vs. the Roth TSP. A legislative change is not needed for a Roth in-plan conversation [sic], either. The team working on implementing the withdrawal options bill will be reviewing the feasibility of including changes to the rules governing withdrawals from traditional vs. Roth balances. A timeline for the withdrawals project is not yet available. At this time, we do not plan to make any changes to allow Roth in-plan conversion."

MichDad
Thanks for asking and thanks for sharing!

Looks like it will be there and plenty of time for me, and my decision to put my tIRA into the TSP rather than my Vanguard 401k will be vindicated.

Have to admit though I am most excited by the upcoming changes to the I Fund. Having to keep buckets of emerging and international small cap is kind of annoying so will love to be back to fewer funds outside the TSP.
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Re: Improving the TSP [for current participants]

Post by SquawkIdent » Wed Dec 20, 2017 12:10 pm

I'm sorry but this is kind of getting tiresome.

The TSP board continually questions why folks leave the TSP within one year of retirement. We have been through the various reasons too many times on this board but yet the TSP only slowly corrects the issues. And even when they do, it's too slow. And it's only a partial fix.

Yes, I know all about the advantages of the TSP...extremely low fees, index funds, the G fund, etc. But the shortcomings are there too. And it will take years to get all of them straightened out, if they even choose to address those issues.

This current "fix" is a start but only that. Yes, you will be able to choose which account (Roth vs. traditional) you want to make your withdrawal from but they both will contain the same exact holdings. It's tax move decision. So the "work around" is still viable if you want different asset allocations. The other changes are good but I was hoping for more.

I realize that this is a personal decision but I really wish the TSP was a "better" plan in the withdrawal/conversion phase.

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Re: Improving the TSP [for current participants]

Post by azanon » Wed Dec 20, 2017 12:26 pm

It's really not that much advantages, and TSP benefits are oversold. As best I can tell current date, the only two advantages ARE the G fund and possibly slightly better asset protection; An advantage that is greater or less depending on how your state treats asset protection for rollovers.

While the G fund is great because you get mid-to-long term treasury rates for "1-day duration", I don't see it stated enough that duration "risk" is actually zero-sum from a long term perspective - kind of like currencies. If rates go down and your bonds have bonafide duration, you make more $$$. If they go up faster than the interest rate premium for the spread on bonds with duration, you lose $$$.

But the low costs benefit of TSP are more-or-less now matched by Vanguard, and I believe Vanguard's version of the S fund is actually 1 bp cheaper. A lot of people forget to add in the "other expenses". Anyway, for all practical purposes, Vanguard is just as cheap.

So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.

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Re: Improving the TSP [for current participants]

Post by Blues » Wed Dec 20, 2017 12:45 pm

azanon wrote:
Wed Dec 20, 2017 12:26 pm
It's really not that much advantages, and TSP benefits are oversold...So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.
For some of us, the fact that the TSP is not taxable by their state of residence is reason enough to stay put.

In such cases, the improvement of the TSP remains relevant.
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Re: Improving the TSP [for current participants]

Post by azanon » Wed Dec 20, 2017 12:54 pm

Blues wrote:
Wed Dec 20, 2017 12:45 pm
azanon wrote:
Wed Dec 20, 2017 12:26 pm
It's really not that much advantages, and TSP benefits are oversold...So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.
For some of us, the fact that the TSP is not taxable by their state of residence is reason enough to stay put.

In such cases, the improvement of the TSP remains relevant.
Ok yeah sure, but I imagine that's a rare exception to the general rule for most states that have state tax. AR taxes traditional IRAs and traditional 401(k)s exactly the same.

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Re: Improving the TSP [for current participants]

Post by SquawkIdent » Wed Dec 20, 2017 1:26 pm

azanon wrote:
Wed Dec 20, 2017 12:26 pm
It's really not that much advantages, and TSP benefits are oversold. As best I can tell current date, the only two advantages ARE the G fund and possibly slightly better asset protection; An advantage that is greater or less depending on how your state treats asset protection for rollovers.

While the G fund is great because you get mid-to-long term treasury rates for "1-day duration", I don't see it stated enough that duration "risk" is actually zero-sum from a long term perspective - kind of like currencies. If rates go down and your bonds have bonafide duration, you make more $$$. If they go up faster than the interest rate premium for the spread on bonds with duration, you lose $$$.

But the low costs benefit of TSP are more-or-less now matched by Vanguard, and I believe Vanguard's version of the S fund is actually 1 bp cheaper. A lot of people forget to add in the "other expenses". Anyway, for all practical purposes, Vanguard is just as cheap.

So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.
I hear you and agree with your comments. That's why I'm 80% sure I will be joining you.

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Re: Improving the TSP [for current participants]

Post by hoppy08520 » Wed Dec 20, 2017 1:32 pm

azanon wrote:
Wed Dec 20, 2017 12:26 pm
It's really not that much advantages, and TSP benefits are oversold...So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.
The G Fund and the asset protection are good enough for me, and the disadvantages are not that onerous and they are gradually being remedied.

The G Fund is so good that have been moves in Congress to worsen it. Thankfully these proposals haven't gone anywhere yet (at least for now...).

House advances 2018 budget resolution with federal retirement cuts - FederalNewsRadio.com
The latest version of the House resolution [as of 10-4-17, now obsolete] also includes a proposal that would reduce the G fund’s rate of return in the Thrift Savings Plan.

“Securities within the G fund are not subject to risk of default. Payment of principal and interest is guaranteed by the U.S. government,” the House report said. “Yet the interest rate paid is equivalent to a long-term security. As a result, those who participate in the G fund are rewarded with a long-term rate on what is essentially a short-term security.”
If the G Fund is so good and is giving me such a free lunch that some in Congress want to get rid of it, then it must be a good thing :-)

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Re: Improving the TSP [for current participants]

Post by Ketawa » Wed Dec 20, 2017 2:05 pm

Duration risk doesn't even out over the long term. Otherwise, everyone would hold long term bonds.

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Re: Improving the TSP [for current participants]

Post by TimeRunner » Wed Dec 20, 2017 2:13 pm

When withdrawal options are eventually improved, I hope they implement electronic transfers for any transfers, and not only for monthly scheduled withdrawals. It would be nice if it was easy to e-transfer money into the TSP too. When I moved money from Fido back to the TSP for TIRA G Fund, it took TSP more than a week to process Fido's check, during which time I was earning no interest on mid-six figure $. Wiring money is not an option.
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Re: Improving the TSP [for current participants]

Post by azanon » Wed Dec 20, 2017 2:18 pm

hoppy08520 wrote:
Wed Dec 20, 2017 1:32 pm
azanon wrote:
Wed Dec 20, 2017 12:26 pm
It's really not that much advantages, and TSP benefits are oversold...So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.
The G Fund and the asset protection are good enough for me, and the disadvantages are not that onerous and they are gradually being remedied.

The G Fund is so good that have been moves in Congress to worsen it. Thankfully these proposals haven't gone anywhere yet (at least for now...
Is G fund really that great? Since the TSP's inception of 1988, the cumulative return of the G fund has been 323.10% vs. 492.12% for F Fund (source: http://www.tsptalk.com/returns/returns3.html). And the F fund (~ same as Vanguard Total Bond Market), is an extremely steady, low-risk bond fund. To this, i would reference some of the graphs I've seen posted here (I think nisiprius did it once) where he compared total bond to, say, S&P 500 index, and in comparison, Total Bond looks like a straight line with the slightest of waves.

Said another way, the fact that G fund doesn't have duration has hurt it's performance so far, relatives to any bond with duration.

I'll say it again; mathematically "duration" risk is zero-sum. It's only a risk from the perspective of if rates go goes up, and up too fast for the interest rate changes to keep up.

Now don't get me wrong; I wouldn't intentionally add duration for no (extra) return. But I'm not going to delude myself into thinking G fund provides massively greater protection than F fund already could or does.

I don't think this is all that much different than trying to claim international stocks are worse than US stocks cause they are invested using different currencies. In practice, that could be a good thing or a bad thing, depending on how well the dollar does vs. foreign currencies. Like duration, it's called a "risk", but it's actually zero-sum or a null over long periods of time.

As soon as the G fund gives the same actual (not to be confused with expected) return of F fund or better 100% of the time, for less risk, (read: not the opposite for some 30 years now) then I'll be singing the praises of G fund. Until then, call me less than impressed.

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Earl Lemongrab
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Re: Improving the TSP [for current participants]

Post by Earl Lemongrab » Wed Dec 20, 2017 2:48 pm

The G fund obviously has solid backing because it's FF&C of the US Government. However, its rate has been sort of average compared to corporate stable-value funds. Megacorp's fund has been very similar to G through the ten years that I've been comparing them. Right now G is at 2.35%, Megacorp at 2.42%.

So, security-wise, it's totally solid. Financially, nothing special. The idea that it's some amazing free lunch isn't really the case.
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Re: Improving the TSP [for current participants]

Post by VictoriaF » Wed Dec 20, 2017 5:38 pm

azanon wrote:
Wed Dec 20, 2017 2:18 pm
hoppy08520 wrote:
Wed Dec 20, 2017 1:32 pm
azanon wrote:
Wed Dec 20, 2017 12:26 pm
It's really not that much advantages, and TSP benefits are oversold...So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.
The G Fund and the asset protection are good enough for me, and the disadvantages are not that onerous and they are gradually being remedied.

The G Fund is so good that have been moves in Congress to worsen it. Thankfully these proposals haven't gone anywhere yet (at least for now...
Is G fund really that great? Since the TSP's inception of 1988, the cumulative return of the G fund has been 323.10% vs. 492.12% for F Fund (source: http://www.tsptalk.com/returns/returns3.html). And the F fund (~ same as Vanguard Total Bond Market), is an extremely steady, low-risk bond fund. To this, i would reference some of the graphs I've seen posted here (I think nisiprius did it once) where he compared total bond to, say, S&P 500 index, and in comparison, Total Bond looks like a straight line with the slightest of waves.

Said another way, the fact that G fund doesn't have duration has hurt it's performance so far, relatives to any bond with duration.

I'll say it again; mathematically "duration" risk is zero-sum. It's only a risk from the perspective of if rates go goes up, and up too fast for the interest rate changes to keep up.

Now don't get me wrong; I wouldn't intentionally add duration for no (extra) return. But I'm not going to delude myself into thinking G fund provides massively greater protection than F fund already could or does.

I don't think this is all that much different than trying to claim international stocks are worse than US stocks cause they are invested using different currencies. In practice, that could be a good thing or a bad thing, depending on how well the dollar does vs. foreign currencies. Like duration, it's called a "risk", but it's actually zero-sum or a null over long periods of time.

As soon as the G fund gives the same actual (not to be confused with expected) return of F fund or better 100% of the time, for less risk, (read: not the opposite for some 30 years now) then I'll be singing the praises of G fund. Until then, call me less than impressed.
I am not comparing the G Fund to the F Fund or any other funds. I am comparing the G Fund to the stress of looking for good CD rates, opening accounts in some distant Credit Unions and monitoring money transfers, interest posting, and other tasks. In retirement, I want to focus on the things that matter. When I have access to the G Fund, it's good enough for me. My biggest problem is that I cannot have a Roth G Fund.

If the TSP starts allowing in-plan Roth conversions, and if the TSP allow me to bring my Roth funds from other institutions back into the TSP, I will be in a financial heaven.

Victoria
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Engineer250
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Re: Improving the TSP [for current participants]

Post by Engineer250 » Wed Dec 20, 2017 5:55 pm

azanon wrote:
Wed Dec 20, 2017 12:26 pm
But the low costs benefit of TSP are more-or-less now matched by Vanguard, and I believe Vanguard's version of the S fund is actually 1 bp cheaper. A lot of people forget to add in the "other expenses". Anyway, for all practical purposes, Vanguard is just as cheap.

So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.
I get where you are coming from but want to point out an apples to apples comparison with the TSP should be other companies’ 401ks not a brokerage account at Vanguard. I know when someone is retiring that’s what they are comparing it to, but it’s still a 401k equivalent.

My own MegaCorp is through Vanguard. But the funds my employer picked are terrible. There are two Vg Russel funds at .08% but the two international funds have 1% expense ratio and the bond funds are both over 0.5%. They do allow a brokerage option, but only with 90% of my money and for a $50 a year fee. I should say they also have the excellent VG target retirement funds but I’m trying to balance between my 401k, TSP, and Roth IRA so would prefer the 3 fund options. So yeah my VG IRA is amazing but TSP compared to my VG 401k still comes out ahead.
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Re: Improving the TSP [for current participants]

Post by Blues » Wed Dec 20, 2017 6:24 pm

VictoriaF wrote:
Wed Dec 20, 2017 5:38 pm
If the TSP starts allowing in-plan Roth conversions, and if the TSP allow me to bring my Roth funds from other institutions back into the TSP, I will be in a financial heaven.

Victoria
I'm with you...right after I finish doing Roth conversions for the missus.

The rollover of a Roth to the TSP wouldn't be that much of a big deal (speaking strictly for myself) since it wouldn't be taxable regardless of its location.
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Re: Improving the TSP [for current participants]

Post by azanon » Wed Dec 20, 2017 6:39 pm

VictoriaF wrote:
Wed Dec 20, 2017 5:38 pm
azanon wrote:
Wed Dec 20, 2017 2:18 pm
hoppy08520 wrote:
Wed Dec 20, 2017 1:32 pm
azanon wrote:
Wed Dec 20, 2017 12:26 pm
It's really not that much advantages, and TSP benefits are oversold...So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.
The G Fund and the asset protection are good enough for me, and the disadvantages are not that onerous and they are gradually being remedied.

The G Fund is so good that have been moves in Congress to worsen it. Thankfully these proposals haven't gone anywhere yet (at least for now...
Is G fund really that great? Since the TSP's inception of 1988, the cumulative return of the G fund has been 323.10% vs. 492.12% for F Fund (source: http://www.tsptalk.com/returns/returns3.html). And the F fund (~ same as Vanguard Total Bond Market), is an extremely steady, low-risk bond fund. To this, i would reference some of the graphs I've seen posted here (I think nisiprius did it once) where he compared total bond to, say, S&P 500 index, and in comparison, Total Bond looks like a straight line with the slightest of waves.

Said another way, the fact that G fund doesn't have duration has hurt it's performance so far, relatives to any bond with duration.

I'll say it again; mathematically "duration" risk is zero-sum. It's only a risk from the perspective of if rates go goes up, and up too fast for the interest rate changes to keep up.

Now don't get me wrong; I wouldn't intentionally add duration for no (extra) return. But I'm not going to delude myself into thinking G fund provides massively greater protection than F fund already could or does.

I don't think this is all that much different than trying to claim international stocks are worse than US stocks cause they are invested using different currencies. In practice, that could be a good thing or a bad thing, depending on how well the dollar does vs. foreign currencies. Like duration, it's called a "risk", but it's actually zero-sum or a null over long periods of time.

As soon as the G fund gives the same actual (not to be confused with expected) return of F fund or better 100% of the time, for less risk, (read: not the opposite for some 30 years now) then I'll be singing the praises of G fund. Until then, call me less than impressed.
I am not comparing the G Fund to the F Fund or any other funds. I am comparing the G Fund to the stress of looking for good CD rates, opening accounts in some distant Credit Unions and monitoring money transfers, interest posting, and other tasks. In retirement, I want to focus on the things that matter. When I have access to the G Fund, it's good enough for me. My biggest problem is that I cannot have a Roth G Fund.

If the TSP starts allowing in-plan Roth conversions, and if the TSP allow me to bring my Roth funds from other institutions back into the TSP, I will be in a financial heaven.

Victoria
Ahh, ok that's interesting. I guess I just use G/F the standard way (?), which is that's the "bond" portion of my TSP portfolio, and i rebalance the stocks with those two funds. So by comparison to the volatility/risk of C, S, or I, they're both plenty stable enough.

I'm still a good ways from retirement myself, but the only way I'm going to keep my after-retirement stress at reasonable levels is to know that I have a portfolio that still has some stocks. I don't plan on saving so much that 100% G would do the trick.

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Re: Improving the TSP [for current participants]

Post by VictoriaF » Wed Dec 20, 2017 6:52 pm

azanon wrote:
Wed Dec 20, 2017 6:39 pm
VictoriaF wrote:
Wed Dec 20, 2017 5:38 pm
azanon wrote:
Wed Dec 20, 2017 2:18 pm
hoppy08520 wrote:
Wed Dec 20, 2017 1:32 pm
azanon wrote:
Wed Dec 20, 2017 12:26 pm
It's really not that much advantages, and TSP benefits are oversold...So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.
The G Fund and the asset protection are good enough for me, and the disadvantages are not that onerous and they are gradually being remedied.

The G Fund is so good that have been moves in Congress to worsen it. Thankfully these proposals haven't gone anywhere yet (at least for now...
Is G fund really that great? Since the TSP's inception of 1988, the cumulative return of the G fund has been 323.10% vs. 492.12% for F Fund (source: http://www.tsptalk.com/returns/returns3.html). And the F fund (~ same as Vanguard Total Bond Market), is an extremely steady, low-risk bond fund. To this, i would reference some of the graphs I've seen posted here (I think nisiprius did it once) where he compared total bond to, say, S&P 500 index, and in comparison, Total Bond looks like a straight line with the slightest of waves.

Said another way, the fact that G fund doesn't have duration has hurt it's performance so far, relatives to any bond with duration.

I'll say it again; mathematically "duration" risk is zero-sum. It's only a risk from the perspective of if rates go goes up, and up too fast for the interest rate changes to keep up.

Now don't get me wrong; I wouldn't intentionally add duration for no (extra) return. But I'm not going to delude myself into thinking G fund provides massively greater protection than F fund already could or does.

I don't think this is all that much different than trying to claim international stocks are worse than US stocks cause they are invested using different currencies. In practice, that could be a good thing or a bad thing, depending on how well the dollar does vs. foreign currencies. Like duration, it's called a "risk", but it's actually zero-sum or a null over long periods of time.

As soon as the G fund gives the same actual (not to be confused with expected) return of F fund or better 100% of the time, for less risk, (read: not the opposite for some 30 years now) then I'll be singing the praises of G fund. Until then, call me less than impressed.
I am not comparing the G Fund to the F Fund or any other funds. I am comparing the G Fund to the stress of looking for good CD rates, opening accounts in some distant Credit Unions and monitoring money transfers, interest posting, and other tasks. In retirement, I want to focus on the things that matter. When I have access to the G Fund, it's good enough for me. My biggest problem is that I cannot have a Roth G Fund.

If the TSP starts allowing in-plan Roth conversions, and if the TSP allow me to bring my Roth funds from other institutions back into the TSP, I will be in a financial heaven.

Victoria
Ahh, ok that's interesting. I guess I just use G/F the standard way (?), which is that's the "bond" portion of my TSP portfolio, and i rebalance the stocks with those two funds. So by comparison to the volatility/risk of C, S, or I, they're both plenty stable enough.

I'm still a good ways from retirement myself, but the only way I'm going to keep my after-retirement stress at reasonable levels is to know that I have a portfolio that still has some stocks. I don't plan on saving so much that 100% G would do the trick.
I have stocks now, and my allocation to stocks will be rising as I will be spending down fixed income. I will continue keeping my stocks at Vanguard and Fidelity. But I would like to keep my fixed income in the TSP. My desire may change if the Treasury starts offering TIPS with the fixed rate of 1-2%.

Victoria
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Re: Improving the TSP [for current participants]

Post by bayview » Wed Dec 20, 2017 9:32 pm

VictoriaF wrote:
Wed Dec 20, 2017 6:52 pm

I have stocks now, and my allocation to stocks will be rising as I will be spending down fixed income. I will continue keeping my stocks at Vanguard and Fidelity. But I would like to keep my fixed income in the TSP. My desire may change if the Treasury starts offering TIPS with the fixed rate of 1-2%.

Victoria
+1

I use the G-fund as my as-close-to-riskfree-as-possible-with-low-hassle fixed income. Everything else is stocks.

F fund and Total Bond are great for what they do --I would use them if they were all I had available --but G still has less risk unless the congresscritters change it.

I see a lot of TSP vs everything else mentality here. Why does it have to be all or nothing? You can keep your fixed in TSP/G and stocks elsewhere, or any other combo. In addition, since I see changes on the horizon, I don't need to make some all-or-nothing change to my investments today. I can tweak for current conditions and do watchful waiting for any improvements on the horizon.
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Re: Improving the TSP [for current participants]

Post by azanon » Wed Dec 20, 2017 10:35 pm

VictoriaF wrote:
Wed Dec 20, 2017 6:52 pm
I have stocks now, and my allocation to stocks will be rising as I will be spending down fixed income. I will continue keeping my stocks at Vanguard and Fidelity. But I would like to keep my fixed income in the TSP. My desire may change if the Treasury starts offering TIPS with the fixed rate of 1-2%.

Victoria
Where the TIPS vs. G fund is concerned, all the research/opinion I've seen on that is that they probably have parity with each other, provided you're not paying much fees for the TIPS. G fund will likely always tend to have a slightly higher yield than short-term TIPS, but it also isn't going to respond as well to unexpected inflation. I bonds and TIPS are the gold standard for inflation protection.

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Re: Improving the TSP [for current participants]

Post by azanon » Wed Dec 20, 2017 10:38 pm

bayview wrote:
Wed Dec 20, 2017 9:32 pm
I see a lot of TSP vs everything else mentality here. Why does it have to be all or nothing? You can keep your fixed in TSP/G and stocks elsewhere, or any other combo.
Since you asked, exactly how do you rebalance your stocks in one place, and those bonds in the TSP? Vanguard has cheap stocks and bonds, so this sounds like a solution looking for a problem.

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Re: Improving the TSP [for current participants]

Post by bayview » Wed Dec 20, 2017 10:52 pm

azanon wrote:
Wed Dec 20, 2017 10:38 pm
bayview wrote:
Wed Dec 20, 2017 9:32 pm
I see a lot of TSP vs everything else mentality here. Why does it have to be all or nothing? You can keep your fixed in TSP/G and stocks elsewhere, or any other combo.
Since you asked, exactly how do you rebalance your stocks in one place, and those bonds in the TSP?
I'm still contributing, aka employed, so I can do two things:
-- I can change my allocation of new contributions to TSP, and
-- I can rebalance in our Vanguard funds.

For post-retirement AA, I'm actually doing a sloppy version of the Bill Bernstein liability-matching vs risk portfolio. I have enough in G to cover 15-20 years of needed withdrawals (with the balance still growing), and everything else (the balance of TSP + our Vanguard funds) are in a 70:30 AA. Some of that 70% equities allo is in TSP. As we inch along, if stocks go up enough, I'll move some of the TSP funds from C+S to G to pad it a bit. Otherwise, any necessary adjustments are made in VG.

I suppose I think of my G fund savings as the equivalent of CD's or something with an inflation edge, and everything else (C+S in TSP plus everything else in Vanguard) as actual investments, with the usual risk issues to oversee.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: Improving the TSP [for current participants]

Post by azanon » Wed Dec 20, 2017 11:09 pm

Ahh ok that's an interesting approach. When I retire, i estimated my federal pension + 2 Social securities (married) will be more than enough "floor" or LMP, which will free me up to just have one portfolio for the variable portion of my income. (if some 60K of inflation adjusting income isn't enough base, something went terribly wrong!) I currently favor longinvest's Variable Percentage Withdrawal, so that's probably what I'll use. I'll be a little sad to lose G, but again to get all of my $$ at Vanguard to make VPW implementation easy will be well worth it for me.

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Re: Improving the TSP [for current participants]

Post by bayview » Wed Dec 20, 2017 11:21 pm

azanon wrote:
Wed Dec 20, 2017 11:09 pm
Ahh ok that's an interesting approach. When I retire, i estimated my federal pension + 2 Social securities (married) will be more than enough "floor" or LMP, which will free me up to just have one portfolio for the variable portion of my income. (if some 60K of inflation adjusting income isn't enough base, something went terribly wrong!) I currently favor longinvest's Variable Percentage Withdrawal, so that's probably what I'll use. I'll be a little sad to lose G, but again to get all of my $$ at Vanguard to make VPW implementation easy will be well worth it for me.
I wish I could stick it out long enough for us to be able to make it on SSx2 + my federal pension, but I don't think it's gonna happen. We're pretty close, though.

If I felt incredibly secure in those income streams, I would have our AA much more aggressive. But since it's close-but-not-quite-there, plus a nervous husband, I have things skewed pretty conservatively. Mostly for DH's peace of mind. :D

As for your VPW plan, don't automatically run off TSP. You can change your withdrawal amount each year under current rules, and perhaps they will relax a bit in the future. Sounds like you have some years left as a gummint employee, so do keep your options open.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: Improving the TSP [for current participants]

Post by TimeRunner » Wed Dec 20, 2017 11:23 pm

I have 80% G, 20% F in TSP as entire tax-deferred bond allocation. TIRA and Roth are at Fidelity, invested in Vanguard Total World ETF (VT). Because VT is up 22%-ish this year, I've had to sell some and add it to the TSP to keep close to my asset allocation (70/30). I haven't yet taken a distro from TSP, although I'm close to doing that, so very interested in how the new TSP options shake out. I move shares from TIRA to Roth at Fidelity each year (aka Roth IRA conversion) until I take SS at 70, seven years from now.
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Re: Improving the TSP [for current participants]

Post by azanon » Thu Dec 21, 2017 8:37 am

bayview wrote:
Wed Dec 20, 2017 11:21 pm
azanon wrote:
Wed Dec 20, 2017 11:09 pm
Ahh ok that's an interesting approach. When I retire, i estimated my federal pension + 2 Social securities (married) will be more than enough "floor" or LMP, which will free me up to just have one portfolio for the variable portion of my income. (if some 60K of inflation adjusting income isn't enough base, something went terribly wrong!) I currently favor longinvest's Variable Percentage Withdrawal, so that's probably what I'll use. I'll be a little sad to lose G, but again to get all of my $$ at Vanguard to make VPW implementation easy will be well worth it for me.
I wish I could stick it out long enough for us to be able to make it on SSx2 + my federal pension, but I don't think it's gonna happen. We're pretty close, though.

If I felt incredibly secure in those income streams, I would have our AA much more aggressive. But since it's close-but-not-quite-there, plus a nervous husband, I have things skewed pretty conservatively. Mostly for DH's peace of mind. :D

As for your VPW plan, don't automatically run off TSP. You can change your withdrawal amount each year under current rules, and perhaps they will relax a bit in the future. Sounds like you have some years left as a gummint employee, so do keep your options open.
When i retire, I'm not going to necessarily have that 2nd social security immediately (because my wife wont be 62), but it'll be inevitable within a few years so for all practice purposes, I consider the floor to be there. Even in my case, it will be a federal supplement until I get the real thing a few years later. But still; it's inevitable so I'd consider those floors to be there.

Regarding VPW using TSP, i actually asked longinvest about that issue in his VPW thread; The issue of only being able to change TSP withdrawals yearly when VPW calls for putting 1 years worth in cash. Longinvest was pretty dubious about that modification especially for higher equity portfolios, and I happen to agree with him. That's because if VPW is done "by-the-book", it has zero "sequence of return" risk; arguably one of the best "features" of VPW.

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Re: Improving the TSP [for current participants]

Post by azanon » Thu Dec 21, 2017 8:40 am

Engineer250 wrote:
Wed Dec 20, 2017 5:55 pm
azanon wrote:
Wed Dec 20, 2017 12:26 pm
But the low costs benefit of TSP are more-or-less now matched by Vanguard, and I believe Vanguard's version of the S fund is actually 1 bp cheaper. A lot of people forget to add in the "other expenses". Anyway, for all practical purposes, Vanguard is just as cheap.

So G fund/slightly better asset protection vs. massively better services at other locations and the advantage of consolidating my retirement accounts in one spot. It's an easy call for me after I retire.
I get where you are coming from but want to point out an apples to apples comparison with the TSP should be other companies’ 401ks not a brokerage account at Vanguard. I know when someone is retiring that’s what they are comparing it to, but it’s still a 401k equivalent.

My own MegaCorp is through Vanguard. But the funds my employer picked are terrible. There are two Vg Russel funds at .08% but the two international funds have 1% expense ratio and the bond funds are both over 0.5%. They do allow a brokerage option, but only with 90% of my money and for a $50 a year fee. I should say they also have the excellent VG target retirement funds but I’m trying to balance between my 401k, TSP, and Roth IRA so would prefer the 3 fund options. So yeah my VG IRA is amazing but TSP compared to my VG 401k still comes out ahead.
Just wanted to quickly say that I completely agree with you. AFAIK, TSP might be the best 401(k) and if not, one of the best. So you're right, I'm only talking from the perspective of both post retirement and post 59 1/2 yrs old, where rollovers and withdrawals from that rollover without penalty are viable options.

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Re: Improving the TSP [for current participants]

Post by Gadget » Tue Feb 06, 2018 3:31 pm

Is it still true after the new tsp changes that you can't do a mega backdoor Roth with the tsp?

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Re: Improving the TSP [for current participants]

Post by MichDad » Tue Feb 06, 2018 4:23 pm

I believe that is true. If it were permitted, it would be big news.

MichDad

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TSP vs Fidelity Zeroes

Post by motorcyclesarecool » Sun Aug 05, 2018 10:24 am

[Thread merged into here, see below (next page). --admin LadyGeek]

As noted in a monstrous thread, Fidelity has just started offering a Total US Stock Market fund and a Total International Stock Market find, both with an expense ratio of 0%, and both with a minimum investment of $0. Fidelity makes its money on the funds by loaning securities to short sellers. I imagine they also hope to upsell their customers later on.

According to this page:
https://www.fidelity.com/mutual-funds/i ... ndex-funds
Fidelity has the TSP’s expense ratio of 0.033% beat across the board. With the notable exception of the G-fund, (I don’t care about the L-funds) I have zero reason to remain with the TSP after separation from service.

FZROX 0.0% < 80%C & 20%S 0.033%
FZILX 0.0% < I 0.033%

FUSVX 0.015% < C 0.033%
FSITX 0.025% < F 0.033%

As a TSP account holder, what is the best way for me to advocate more cost cuts to the Federal Retirement Thrift Investment Board?
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Re: TSP vs Fidelity Zeroes

Post by PFInterest » Sun Aug 05, 2018 10:31 am

the G fund itself is a reason not to leave the TSP as well as different asset protection plans vs IRAs (though you dont say this).

the difference between 0.0 and 0.03 is inconsequential and i wouldnt advocate anything.

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Re: TSP vs Fidelity Zeroes

Post by trueblueky » Sun Aug 05, 2018 10:47 am

motorcyclesarecool wrote:
Sun Aug 05, 2018 10:24 am
As noted in a monstrous thread, Fidelity has just started offering a Total US Stock Market fund and a Total International Stock Market find, both with an expense ratio of 0%, and both with a minimum investment of $0. Fidelity makes its money on the funds by loaning securities to short sellers. I imagine they also hope to upsell their customers later on.

According to this page:
https://www.fidelity.com/mutual-funds/i ... ndex-funds
Fidelity has the TSP’s expense ratio of 0.033% beat across the board. With the notable exception of the G-fund, (I don’t care about the L-funds) I have zero reason to remain with the TSP after separation from service.

FZROX 0.0% < 80%C & 20%S 0.033%
FZILX 0.0% < I 0.033%

FUSVX 0.015% < C 0.033%
FSITX 0.025% < F 0.033%

As a TSP account holder, what is the best way for me to advocate more cost cuts to the Federal Retirement Thrift Investment Board?
TSP does not have other funds to push, so they cannot have a loss leader to attract customers.

If BlackRock feels pressure from Fidelity, they may offer a lower ER the next time the contract is up for bids. Not sure when that occurs; government contracts typically have renewal options up to five years.

Agree that G Fund is great; I will keep some TSP for that alone.

You can contact the board with your concern.

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Re: TSP vs Fidelity Zeroes

Post by jsprag » Sun Aug 05, 2018 12:22 pm

Funds close all the time, and Fidelity's bold experiment with no-fee funds isn't immune to market forces.

I wouldn't jettison TSP until Fidelity demonstrates a couple calendar years of returns that track closely (exactly?) with the underlying index.

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Re: TSP vs Fidelity Zeroes

Post by Earl Lemongrab » Sun Aug 05, 2018 12:52 pm

The TSP allows incoming IRA rollovers, even when retired, so if this would be TIRA then you could return the funds if unhappy. Roth would be stuck, but you can come close to TSP with various options elsewhere.
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Re: TSP vs Fidelity Zeroes

Post by daveydoo » Sun Aug 05, 2018 12:59 pm

motorcyclesarecool wrote:
Sun Aug 05, 2018 10:24 am

As a TSP account holder, what is the best way for me to advocate more cost cuts to the Federal Retirement Thrift Investment Board?
This will not happen. TSP does not need loss-leaders or market share. And if you are financially in a position where lowering your ER from 0.03 to 0.00 will do anything for you, then this would not seem to be worth more than one minute of your thought. This is $300 a year on a million-dollar TSP portfolio.

While you're on the phone with the federal government, you should see about getting your personal income tax rate reduced. :D
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