TSP investors who put money into any of the 5,000 new funds available in the federal 401(k) plan will do so for two basic reasons: money or passion.
1.) To make more money by investing in funds with the potential to outstrip traditional earnings of the broad-based stock indexed C, S funds linked to the U.S. stock market, the F fund (bonds) or the G fund (treasury securities). In the past, all of the funds have done better for investors than the G fund. But since the arrival of the latest bear market, the G fund is the only one with positive returns.
2.) To put some or all of their retirement nest eggs in funds that support social, environmental or civic minded causes. Since the beginning of the TSP, the nation’s largest employer 401(k)-style plan, many individual investors have asked for more choices. So have financial firms and groups and causes that want a piece of the $734 billion with a B, TSP. Politicians of both political parties have pushed for options for their constituents. Or groups representing big political donors!
When the TSP was setup — to cover active and retired federal and military personnel — the word from Congress was “KIS.” As in “Keep It Simple.” And cheap, as in minimal fees and charges to investors. For the TSP, which includes everyone from ex-presidents to Senators, park rangers and DEA agents and Marines. And their families. It has worked well and many rank-and-file feds have become self-made millionaires. But with the new overhaul, the TSP decided to offer lots more options… at a price.
The TSP has long been known for having among the lowest fees in the business. That allows investors to keep more of their earnings rather than paying a percentage to a broker or fund BEFORE they earn anything.
Recently, we got a question from a reader who wanted to know if he had to pay for information about the fees. This is information you may want to pass on to coworkers and friends to are TSP investors. Here’s the lowdown on fees Kim Weaver, director of external affairs for the Federal Retirement Thrift Investment Board:
In accordance with the statutory requirement that TSP participants using the MFW (mutual fund window) bear the cost of the MFW, all TSP participants electing to invest in the MFW would incur additional fees: an administrative fee of $55 annually; an annual maintenance fee of $95; a per trade fee of $28.75; and any fees and expenses imposed by the specific mutual fund(s) in which they invest.
So participants who choose to invest pay $150/year; $28.75 when they make a trade plus whatever fees/expenses are associated with their chosen fund.