Time for a little TSP insurance?

When they retire or leave government, some people transfer their Thrift Savings Plan 401(k) accounts to IRAs that offer more flexibility and investment options.

Thinking of pulling out of the federal Thrift Savings Plan when you retire or leave government for another job? Lots of people do it. For some, it’s a great move. For others, not so much.

Some of the folks who left the shelter of the TSP have done well with their more active and diverse investment choices. They offer more options than the TSP’s G fund (Treasury securities), F fund (bonds), C fund (S&P 500), S fund (medium and small-cap U.S. stocks) and the I (international) fund.

But once out, some people try to get back into the TSP. They may miss its lowest-in-the-business administration fees once they see how much their more actively managed funds (outside of the TSP) cost them. Even if they get slightly better returns from the more actively managed funds, in some cases, the higher fees they are charged offset those gains. Others miss the ease of the L (Lifecycle) funds, which automatically adjust over time. And many also miss the TSP’s low administrative fees, which are the lowest in the business. Sometimes higher returns (if any) by more actively managed funds are reduced or wiped out by the higher fees.

But if they’ve closed their accounts — or don’t leave a minimal amount in the TSP — they can never come back to the TSP. Unless …

Unless they leave a minimum of $250 in their TSP account. Leaving just that small amount ensures that when/if they become disillusioned with investing life outside the TSP, they can return to it. The Federal Retirement Thrift Investment Board says it cashes out accounts of $200 or less automatically, “So to be safe, someone should leave $250 (in his or her account) and they’d be able to bring their money back in.”

Think of it as a $250 “I shall (or can) return” insurance policy.

Meantime, it appears Congress will approve a bill that will make the TSP more user-friendly, and make the withdrawal process more flexible. But like all things legislative, it’s complicated. So here is the text of the House report on the bill. If it becomes law, it should make the TSP more attractive to investors who might otherwise take their money with them when they leave.

Nearly Useless Factoid

By Michael O’Connell

The Co-Operative Union Ltd. created the world’s largest pancake in 1994. Weighing 3 tons, the pancake measured 49 feet, 3 inches in diameter and 1 inches thick.

Source: Guinness World Record

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