As a TSP participant, you probably have spent many hours watching your investments grow (or, sadly, fall) over your career. Your stomach has churned as the markets fell and your spirit has soared along with the bull markets.

However, many of us don’t think past saving and growing our money. How are you going to use it? Do you want a lump sum? Do you want monthly payments? What will you need and when will you need it?

The folks who run the TSP have been thinking about those questions too. Last summer, they crunched some numbers about people who had recently left the government. They found that 45 percent of TSP participants who had left sometime in 2012 had taken all of their money out of the TSP by the end of 2013.

That caused them to ask themselves — why was that happening? While there probably are lots of reasons, one reason they focused on was TSP withdrawal options. Right now, TSP participants can take one partial withdrawal and then monthly payments, two partial withdrawals or one full withdrawal. The people who run the TSP wanted to know if those options were too limited and were motivating people to take their money out.

So, they asked them. During August, the TSP surveyed participants who had withdrawn all their money and asked them why. They received almost 7,000 responses and what they heard was that many withdrawals were made to buy cars and homes, pay for their kids’ college or medical bills or eliminate credit card debt. But they also heard that many of the withdrawals were the result of people wanting greater withdrawal and investment flexibility.

The next step is for the people who run the TSP — themselves federal workers and TSP investors — to analyze these answers and see what changes should be made. The withdrawal options for the TSP are set in law. If the Board that runs the TSP wants to make changes, they will have to go to Congress. But first, they will continue to crunch numbers and talk to TSP participants to decide what changes should be made.

People asked for more investment options. The TSP is renowned for its low costs, which are driven by the fact that it’s a simple plan with passively managed index funds. So, any changes to the investment options have to be weighed against what that might do to the low cost of the plan.

In 2009, Congress authorized, but did not require, the TSP to offer a “mutual fund window” — a way to invest in mutual funds outside the TSP. The TSP is analyzing what offering a mutual fund window would do to cost, complexity and the need to fully educate its 4.6 million participants. That work is ongoing, and the TSP expects to provide more information to its Board by the end of the year.

NEARLY USELESS FACTOID:

By Michael O’Connell

Leo Tolstoy’s “War and Peace” is made up of 587,287 words. By comparison, Mark Twain’s “The Adventures of Huck Finn” weighs in at 109,571 words and Kurt Vonnegut’s “Slaughterhouse-Five” comes in at just 49,459 words.

Source: Indefeasible.

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