Forty-five percent of TSP investors who left government in 2012 closed their federal accounts within a year, according to a survey by the Board that runs the giant 401(k) style program.

The obvious question is why?

For the majority of federal and postal workers (under the FERS retirement plan) the TSP was designed to provide a third or more of their post-retirement income. Social Security and the FERS retirement plan are the defined benefit components of the package.

Many bona fide financial experts — from Vanguard founder John Bogle on down the line — say that the TSP is as good as it gets. In addition to the 5 percent government match (for FERS investors), the TSP charges the lowest administrative fees in the business. While many people don’t pay attention to administrative costs, Bogle says they can cut deeply into returns.

The TSP also offers a unique investment option, the special Treasury securities G-fund. Again, as safe as it gets. Unlike stocks, bonds, REITS and precious metals investments, the G-fund never has a bad day.

So what’s not to like about the TSP?

Some people want more adventure, more freedom, as in more investment options. Since the TSP was setup there has been pressure from investors, outside groups and politicians to add more funds to the TSP. Funds that invest in gold, real estate, a dot-com fund, emerging country markets or funds that are socially responsible or invested in minority-owned companies.

In 2009, Congress authorized (but didn’t require) the TSP to offer a “window” time period in which people could invest in mutual funds outside the TSP. That’s still being studied.

Meantime, lots of outside groups are drooling at the prospect of getting a piece of the TSP action. The TSP has 4.6 million participants, active and retired. Even a tiny piece of their biweekly, automatic investments would be a dream come true for cash-hungry funds, companies and industries.

So what are, and what would, people who leave the TSP do with their money? Why would they close their accounts.

When the TSP board asked them why they withdrew money from their accounts, nearly 7,000 responded. They gave reasons ranging from paying off bills (college, credit cards) to the purchase of a house, car or because they wanted more investment options.

Today at 10 a.m., Allan Roth, financial writer for AARP and other media, will be our Your Turn radio show guest. Roth, formerly with CBS Money Watch, will talk about the pros and cons of being in the TSP, what people are looking for in investment options and give five bad money moves that should sound alarm bells when you are considering an investment. Later, we’ll be joined by Federal Times writer Andy Medici. He’ll talk about the phased retirement timetable, the flap over background checks and whether Uncle Sam is in for another CFC downer this year.

NEARLY USELESS FACTOID:

By Michael O’Connell

Milton Bradley, a successful lithographer, introduced his board game, The Game of Life or just “LIFE”, in 1860. The game was first known as The Checkered Game of Life.

Source: Wikipedia.

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