Your Retirement Egg Is Nesting Where?

The place where I work is full of smart people. The company offers a good 401(k) plan. It does not offer any matching contributions (like the federal TSP) and it’s administrative fees are much, much higher than those of the TSP. It offers us more than a dozen fund options. This includes funds that invest in various things and funds that have various goals.

I recently asked some of my newsroom colleagues some basic questions about our 401(k) plan. Like which funds they are invested in. Their answers are as follows:

• “Not sure!”
• “My husband handles all that!”
• “My wife is the financial genius in our family.”
• “What are the choices again?”
• “Duh!”

This is the way smart people tell you they don’t know because the phrase “I do not know” is apparently not taught in journalism (or law) school.

A couple of folks followed through. That is, they found their quarterly statements and checked to see where their bi-weekly, tax-deferred contributions, are going. Which was: they were in the “safest” (as in lowest-yielding) money market option. In other words although they are investing for the long haul, they weren’t in stocks or bonds, they were in a low-yielding fund with a return less than inflation and is not guaranteed like they thought.

The folks who run the federal TSP are always checking to see how it’s doing. Is it user-friendly? Are worker/retiree investors informed but not micro-managed? The bottom line is that folks in the TSP get more help and attention from management that do most private sector employees. There are a couple of reasons for that, including the fact that Congress (and various other regulatory agencies) are always taking the TSP’s temperature. Members of Congress and high federal officials are also TSP investors. They want to make sure it operates at minimal cost, to keep administrative fees low. So far, so good. The fees are the lowest in the business.

Green With Envy

Liz Pulliam Weston says she would love to get in the TSP, but she can’t because she doesn’t work for the government and isn’t in the military. What she is is the internet’s number one personal finance expert. She writes an obviously popular column for MSN Money. And she’s written a book, Easy Money, that is easy to read and have some invaluable tips.

She was our guest last week on Your Turn, and during the show she said what many other financial experts have said. That is that she would love to be able to participate in the TSP, in part because of its super-low fees.

Asked about the TSP’s Lifecycle funds, Weston said: “I love them. They do all the work for you.” The L-funds are target funds for the years 2020, 2030 and 2040, as well as a current income fund. You pick the year closest to when you think you will begin withdrawing money from your account. If that’s 2022, for example, you would want to consider the 2020 fund. Each has the appropriate mix (according to financial managers) of stocks, bonds and the super-safe Treasury G-fund. The funds are rebalanced daily, growing more conservative as you get closer to your target date.

Weston and others say the L-funds permit investors to relax during good and bad times in the market and the economy. And to avoid what can be stupid mistakes when long-term investors are tempted to react or over-react based on what can be short-lived problems or crises.

Her interview is archived. If you would like to hear it, including her advice about married couples investing and budgeting, click here.

Nearly Useless Factoid

Sunday is International Respect for Chickens Day, “designed to celebrate the beauty, dignity and life of chickens.” Or, as put on some television show I’ve since forgotten, “Tell the world to tell the children to tell the chickens that we’re on our way!” Have a great weekend.

To reach me: mcausey@federalnewsradio.com

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