TSP success stories: A double-edged sword?

Senior Correspondent Mike Causey asked whether spreading good news about the Thrift Savings Plan was a good thing. His readers said maybe not.

On the people side of the federal news beat, stories about the Thrift Savings Plan are almost always popular. Sometimes capturing more eyes than stories about pay raises or potential benefit cuts. But while many people want more reporting on the TSP, there are some who think that the more publicity it gets the more likely it is that fed-hating budget cutters in Congress will mess with the nearly $500 billion in-house 401(k) plan for federal and uniformed military personnel. So who’s right? Probably both.

Tuesday’s column, inspired by a reader, was about the potential downside of letting feds — and other taxpayers — know how successful the optional retirement program has been. How savvy feds are as investors. And how income from the TSP will make the difference between living a comfortable vs. a marginal retirement. It should have made non-federal taxpayers glad that feds are fending for themselves, doing well with their own money. But in Washington, every silver lining comes with a cloud.

Lots of readers responded to the fear that good news about the TSP is bad news for TSP investors. Most said they wanted regular reports — good or bad — about the state of the TSP. They said they were inspired by the success of the program and the number of self-made millionaires who for years have invested steadily — in good times and bad — in the TSP. It now has nearly 10,000 millionaires (some of them members of Congress) and the number is growing as the stock market continues its spectacular rebound from the Great Recession. Hearing from some of these self-made, self-funded TSP millionaires, it is hard to argue with their success. For instance:

“In regard to your column, ‘Should TSP millionaires be congratulated or horse-whipped?,’ the same thought has occurred to me, that certain folks would react to these stories and want to cut FERS TSP benefits.

“I retired at the end of last year, and although TSP’s costs are rock-bottom, the withdrawal option choices, especially if one also has Roth TSP funds, are inadequate, and no changes are expected for years as the TSP has bigger priorities and legislation is required. I’m one of the TSP ‘millionaires’ with close to $1.6 M, accumulated the old-fashioned way. The horse-whip issue is another reason to transfer all funds except $500 or so to an outside brokerage firm, which I’ll be doing shortly.

“One of the current best strategies around is to transfer out all but a placeholder (leaving a minimum of $200 in your TSP account), then transfer back in just the Traditional IRA money one would want invested in bonds, and invest it all in the G fund, because there’s nothing like it ‘out there.’ The outside account holds equities only. This hybrid strategy falls apart completely if the G fund’s interest rate setting is lowered, and now that it’s been threatened by some in Congress, even this approach has increasing risk now.

“All the more reason to thank TSP for its service, leave a placeholder, and see what happens down the road.

“Please don’t use my name, but feel free to quote or use these thoughts. Thanks!”

Or this …

“Imponderables & unanswerables:

“Beatings will continue until morale improves

“Do you walk to work or beat your wife (or carry your lunch, etc.)?

“Seems we get beat enough as is — don’t need any extra incentives.

“I am still aggravated over the initial IRA offering — I saved the maximum only to have Congress vote the very next year to reduce it because ‘taxpayers were saving too much.’ Oy!

Jim S.

Or this … still current blast-from-the-past …

“When you were at The Washington Post, I wrote you a letter prophesying heavy-handed criticism of successful savers for retirement under FERS would occur. I’ve tried to find a copy of the letter I sent you, but I’ve been unable to locate it. The powers-that-be offered advice and guidance to the federal employees to get them off their backs. They accepted the advice and have done very well. Now, the powers-that-be are criticizing the employees for following their advice and coming out on top — well many are.

“If for no other reason than to encourage the young federal employees, keep telling them to save, save, save. They should not become discouraged even if the 535 (multi) millionaires on the Hill criticize them.

“Regards from a very longtime reader.”

Nearly Useless Factoid

By Michael O’Connell

Monopoly Board Games produced after September 2008 come with $20,580 in play money. Standard editions produced before that came with $15,140.

Source: The Spruce

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